Dollar, bond yields dip amid benign USA inflation data

  • Dollar, bond yields dip amid benign USA inflation data

Dollar, bond yields dip amid benign USA inflation data

The U.S. dollar remained broadly on the back foot as traders preferred to play the risk-on trade against the yen, especially before key U.S. inflation data later today that may skew interest rate expectations in the markets.

"Grocery prices have actually declined in the past year, but the cost of takeout and eating out has risen sharply, perhaps reflecting the impact of minimum wage increases in many states", MarketWatch noted.

Consumer prices in the USA came in unchanged in the month of June, according to a report released by the Labor Department on Friday.

The core rate rose 0.1% on the month compared with an expected increase of 0.2% with the year-on-year rate unchanged at 1.7% which was in line with expectations. The drop came after the lacklustre U.S. data raised doubts about USA economic growth and whether the Fed will hike rates again this year. The current target for the funds rate is 1-1.25%, while inflation is around 1.4%, as per CNBC. The Commerce Department said on Friday retail sales fell 0.2 percent last month. Retail sales dropped 0.2 percent last month.

The dollar's index against a basket of six major currencies was hovering at 95.58, just above its nine-month low of 95.47 plumbed at the end of June.

After taking a deeper dive into the report, Thomas Simons, seniors money market economist at Jefferies, said the retail figures offered few reasons for optimism about economic outlook, given the muted spending and sluggish inflation reports. The NT dollar this week rose 0.6 percent against the greenback from NT$30.610 on July 7.

Peter Boockvar, chief market analysts for the Lindsey Group, sees the central bank "backing off somewhat from hiking rates in September". Prices of oil, one of Canada's major exports, climbed and were on track for solid weekly gains following positive demand signals, production issues in Nigeria and a reported decline in inventory.

That view was further reinforced by other US policymakers such as Dallas Federal Reserve Bank President Robert Kaplan on Thursday, though analysts were wary of kicking the dollar lower before USA inflation data.

Dow Jones closed up by 0.41 percent, S&P 500 ended up 0.47 percent, Nasdaq finished the day up by 0.59 percent.

Janet Yellen's hawkish sentiment earlier this month gave way to a cautious tone on Wednesday when she conceded that subdued inflation could hinder the Fed's rate hiking plan - presumably she had been privy to Friday's inflation figures before the rest of us.

The pound on Friday rose 1.18 percent to US$1.3088, up 1.6 percent for the week. Brent futures gained 1.5 per cent to $48.25 per barrel.