Dollar Holds Near Eight-Day High as US Inflation Data Bolsters Fed Hike Bets

The US dollar hovered near an eight-day high on Thursday, supported by inflation data that slightly strengthened the case for another Federal Reserve rate hike this year. The greenback's index rose 0.21% to 99.13, its strongest level since August 19.

Fresh Commerce Department figures showed the Personal Consumption Expenditures (PCE) Price Index rose 3.7% year-on-year in July, unchanged from June and marginally above the 3.6% that economists had expected. On a monthly basis, PCE increased 0.2%, beating the 0.1% forecast, after a 0.1% decline in June.

The reading keeps the market's expectation of a Fed rate hike by year-end alive, though much attention now turns to the central bank's Jackson Hole symposium, which begins later Thursday. Fed Chair Kevin Warsh's upcoming speech is seen as the key test for the policy outlook.

Traders are also watching a scheduled speech and press conference by Bank of Japan Deputy Governor Ryozo Himino for hints on a possible September rate hike. In a similar address before the January 2025 hike, Himino said policymakers would "discuss and decide whether to raise interest rates." Analysts note that if he uses comparable wording this time, it could signal a strong likelihood of a move next month.

Money markets currently price in an 87% chance of a BOJ rate hike in September. The dollar traded at 159.23 yen, well off a multi-decade low of around 164, but having given back most of its intervention gains.

Elsewhere, the Canadian dollar held steady at C$1.388 per dollar after US President Donald Trump said it was "time to teach Canada you can't do this anymore," following the breakdown of trade talks between the neighbours. The euro traded at $1.1655, while the British pound was steady at $1.3592. The Australian dollar rose 0.18% to $0.7181, and the New Zealand dollar gained 0.1% to $0.5948.

In cryptocurrencies, bitcoin rose 0.55% to $78,874.60, while ether was up 1.07% at $2,498.35.