Dollar Near 8-Day High as US Inflation Lifts Fed Odds

Dollar index climbs to 99.13, highest since August 19; markets price 87% odds of BOJ hike next month The dollar held near an eight-day high on Thursday after US inflation and other economic data slightly lifted expectations of a Federal Reserve rate hike, ahead of the Jackson Hole central bankers' symposium set to begin later in the day. Markets are also watching a speech and press conference from Bank of Japan Deputy Governor Ryozo Himino on Thursday for signals on the likelihood of a September rate hike and the size and pace of any subsequent tightening. US Commerce Department data released overnight showed the Personal Consumption Expenditures Price Index rose 3.7% in the 12 months through July, unchanged from June and slightly above the 3.6% estimate from economists polled by Reuters. On a month-on-month basis, PCE rose 0.2%, exceeding the 0.1% estimate, after falling 0.1% in June. The inflation reading kept alive market expectations of a Fed rate hike by year-end, though Fed Chairman Kevin Warsh's upcoming Jackson Hole speech "will be the ultimate test," Westpac economist Ryan Wells said in a note. The dollar index, which tracks the greenback against a basket of currencies including the yen and euro, rose 0.21% to 99.13, its highest level since August 19. Against the yen, the dollar traded at 159.23, having given back most of its intervention-driven gains but remaining well off the multi-decade low of around 164, with traders awaiting Himino's speech due at 0130 GMT. "In a speech shortly before the rate hike at the January 2025 meeting, Himino said policymakers would 'discuss and decide whether to raise interest rates,'" said Akihiko Yokoo, senior analyst at Mitsubishi UFJ Bank, in a note. "If similar wording is used this time, it would likely be taken as signaling a strong possibility of a rate hike at the September meeting." Yokoo added, however, that active yen buying is likely to remain limited until both Himino and Warsh have spoken. Money markets are currently pricing an 87% chance of a BOJ rate hike next month, according to data from money market broker Totan Tanshi. The Canadian dollar held steady against the greenback at C$1.388. US President Donald Trump said Wednesday it was "time to teach Canada you can't do this anymore," just days after trade talks between the two countries broke down. The euro traded at $1.1655, while the British pound held steady at $1.3592. The Australian dollar strengthened 0.18% to $0.7181, and New Zealand's kiwi gained 0.1% to $0.5948. In cryptocurrencies, bitcoin rose 0.55% to $78,874.60, while ether gained 1.07% to $2,498.35.