US dollar retreats as inflation runs warm, jobless claims tick higher
The U.S. dollar weakened against major currencies such as the euro and yen on Thursday, as modestly hotter August inflation data and weaker-than-expected initial jobless claims reinforced the view that the Federal Reserve will resume cutting interest rates next week.
In afternoon trading, the dollar was down 0.3% against the yen at 147.09 yen, while the euro rose 0.4% to $1.1738. As a result, the dollar index, a measure of the greenback's value against six major currencies, dipped 0.3% to 97.51.
The euro was also helped in part by diminished expectations of further cuts in borrowing costs, after the European Central Bank left interest rates unchanged on Thursday as expected and maintained an upbeat view on growth and inflation.
U.S. economic data, however, was the more predominant currency driver.
Data showed U.S. consumer prices rose more than expected in August while the annual increase in inflation was the largest in seven months. The Consumer Price Index increased 0.4% last month after increasing 0.2% in July, the Labor Department's Bureau of Labor Statistics said.
In the 12 months through August, the CPI advanced 2.9%, the largest increase since January, after climbing 2.7% in July.
In other currency pairs, the euro gained 0.2% against the yen to 172.78 yen , and was flat against sterling at 86.14 pence .
ECB President Christine Lagarde told a press conference after the bank held interest rates steady at 2% that the euro zone continues to be in a "good place," adding that inflation is where the ECB wanted it to be.
The euro is stabilizing after a two-day streak of declines as geopolitical tensions continue on the EU's eastern flank. Poland said it shot down suspected Russian drones in its airspace on Wednesday with the backing of aircraft from its NATO allies, the first time a member of the Western military alliance is known to have fired shots during Russia's war in Ukraine.
Elsewhere, the dollar fell 0.5% versus the Swiss franc to 0.7956, while sterling gained 0.4% versus the greenback to $1.3578.
Source: Reuters
