FX.co ★ Dollar Near 2-Week Lows

The dollar index slipped to 99 on Thursday, its lowest level in nearly two weeks, after remarks from Fed Governor Waller signaled support for leaving interest rates unchanged if inflation continues to improve. “If this continues in the data due over the next two weeks, I would be inclined to support holding the target for the federal funds rate at its current setting,” Waller said. A moderation in oil price gains also helped ease worries about mounting inflationary pressures.

Markets are now pricing in roughly a 50% chance of a Fed rate hike this month, down from about 70% earlier in the week, when a sharp rise in oil prices intensified inflation concerns and followed Fed Chair Warsh’s pledge at the Jackson Hole Symposium to keep inflation under control. Investors are awaiting Friday’s jobs report, with the next key inflation data due next week. The greenback traded mostly lower against the yen, as traders increased bets on rate hikes by the Bank of Japan.