FX.co ★ Dollar Steadies Ahead of PPI Data

The dollar index stabilized around 99.9 on Thursday after a bout of heightened volatility in the previous session, as investors awaited July’s producer price data for fresh insight into recent inflation dynamics. Figures released on Wednesday showed that US consumer inflation slowed for a second consecutive month to 3.4% in July, with prices rising just 0.1% from the prior month. Following the report, markets priced in roughly a 40% probability of a 25 basis point Federal Reserve rate hike in September, down from nearly 50% the day before. At the same time, investors continued to monitor the prospects for an agreement to reopen the Strait of Hormuz, though increasingly confrontational rhetoric between the US and Iran, alongside stalled negotiations, dampened expectations for a near-term deal. Elsewhere, traders stayed alert to the risk of official intervention to support the yen as it neared the 160 level against the dollar.