US Dollar Weakens, Markets Watch for Divided Fed Signals
The US dollar weakened slightly in trading on Thursday (July 9), as inflation concerns eased after oil prices fell again. The market was also still digesting the minutes of the Federal Reserve meeting, which showed that the internal debate regarding the direction of interest rates remained fairly balanced.
The US dollar index, which measures the greenback's strength against six major currencies, fell slightly to 100.96 at 3:55 PM ET (7:55 PM GMT).
The minutes of the June 16–17 FOMC meeting showed that some officials had supported an immediate interest rate hike. However, the Fed ultimately maintained its benchmark interest rate, although the latest dot plot projections still showed a hawkish bias.
The debate within the Fed appears quite divided. Some officials see the possibility of inflation returning to the 2% target on its own, while others believe price pressures could remain high due to demand-related issues related to artificial intelligence, the Iran war, or the impact of tariffs.
Sentiment towards the dollar is also influenced by movements in oil prices. After briefly rising due to the escalation of the US-Iran conflict, oil prices fell again after President Donald Trump said Iran was eager to reach a deal.
Trump's comments raised hopes that the conflict would not escalate into a full-blown war. Previously, the US launched strikes on approximately 170 targets in Iran in retaliation for attacks on three commercial tankers.
However, geopolitical risks have not completely disappeared. Iran retaliated by attacking US bases in the Gulf, while Trump also stated that the ceasefire with Iran was "over."
New York Fed President John Williams said he did not expect energy price increases to persist for the remainder of the year. This statement helped ease some market concerns about energy inflation.
In Asia, the Chinese yuan strengthened against the US dollar. The USD/CNY pair fell 0.1% to 6.7921, although Chinese inflation data showed mixed signals.
Government data showed that China's producer price index, or PPI, rose 4.1% year-on-year in June, the highest since July 2022. However, consumer inflation, or CPI, rose only 1.0%, slowing from the 1.2% increase in the previous month.
Meanwhile, the Japanese yen also recorded a rare strengthening against the US dollar. USD/JPY fell 0.1% to 162.40, although the yen remains near its weakest level in four decades and remains above the 160 area.
For the market, the US dollar's weakness reflects a combination of falling oil prices, uncertainty about the direction of the Fed's interest rates, and increased demand for other currencies such as the yuan and the yen. However, as long as geopolitical and inflation risks remain intact, pressure on the dollar is likely to remain limited. (arl)
Source: Newsmaker.id
