The dollar plummeted to its lowest in more than a year on Wednesday after data showed the rise in U.S. consumer prices eased in June, suggesting the Federal Reserve may have to raise interest rates only one more time this year.
The dollar index dropped as low as 100.58, the lowest since April 2022, and was last down nearly 1% at 100.58 , on track for its largest daily percentage loss since early February.
The greenback also hit its lowest against the Swiss franc since early 2015 after the inflation report. It was last down 1.3% at 0.8676 francs, having fallen to a session low of 0.8660 earlier, its weakest since the Swiss National Bank removed the peg from the Swiss currency in January 2015.
Core U.S. consumer prices rose just 0.2% in June, compared with forecasts for a gain of 0.3%. On an annual basis, U.S. CPI advanced 4.8%, lower than market expectations for a 5% increase. That was also the smallest annual increase in more than two years.
“Today’s softer core inflation release reinforces our base case and the market’s initial read on the Fed’s last rate decision that the U.S. central bank will only be able to hike one further time this cycle,” wrote Simon Harvey, head of FX analysis at Monex Europe in London, in emailed comments.
The inflation report “resulted in the dollar extending its post-payrolls decline, with losses continuing to be most visible against currencies that are deeply undervalued and sensitive to U.S. yields, such as the Norwegian crown, Swedish crown, and Japanese yen,” he added.
U.S. rate futures still show traders overwhelmingly expect the policy rate to rise a quarter point, to a 5.25%-5.5% range, at the Fed’s July 25-26 meeting, but now see about a 25% chance of another rate hike before year’s end, down from about 35% before the report.
“The Fed may have talked itself into a corner with a July 26th rate hike. The data don’t confirm that they need to actually hike,” said Brian Jacobsen, chief economist at Annex Wealth Management, in Menomonee Falls, Wisconsin.
“Since they’re stubborn, they’ll probably do it anyways. Thankfully the market has been expecting that hike. The end is near for hikes.”
Against the yen, the dollar dropped to a six-week low of 138.17 yen . It last changed hands at 138.21, down 1.5%.
The euro surged to its highest since March last year of $1.1125 . The single European currency last traded up 1% at $1.1124.
Sterling struck a fresh 15-month high of $1.30 , last trading up 0.5% at $1.2994. The pound is being driven by expectations for the Bank of England to deliver more rate rises to tame UK inflation, which is the highest of any major economy.
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Currency bid prices at 12:12PM (1612 GMT)
Description | RIC | Last | U.S. Close Previous Session | Pct Change | YTD Pct Change | High Bid | Low Bid |
Dollar index | 100.5700 | 101.6000 | -1.00% | -2.822% | +101.6100 | +100.5600 | |
Euro/Dollar | $1.1126 | $1.1010 | +1.07% | +3.85% | +$1.1129 | +$1.1008 | |
Dollar/Yen | 138.2650 | 140.3800 | -1.52% | +5.44% | +140.3400 | +138.1700 | |
Euro/Yen | 153.84 | 154.49 | -0.42% | +9.65% | +154.5200 | +153.5200 | |
Dollar/Swiss | 0.8675 | 0.8794 | -1.35% | -6.18% | +0.8793 | +0.8660 | |
Sterling/Dollar | $1.2993 | $1.2931 | +0.47% | +7.43% | +$1.3000 | +$1.2905 | |
Dollar/Canadian | 1.3177 | 1.3230 | -0.40% | -2.74% | +1.3234 | +1.3144 | |
Aussie/Dollar | $0.6787 | $0.6687 | +1.48% | -0.45% | +$0.6795 | +$0.6683 | |
Euro/Swiss | 0.9652 | 0.9679 | -0.28% | -2.46% | +0.9695 | +0.9629 | |
Euro/Sterling | 0.8561 | 0.8511 | +0.59% | -3.20% | +0.8565 | +0.8506 | |
NZ Dollar/Dollar | $0.6297 | $0.6198 | +1.59% | -0.83% | +$0.6299 | +$0.6183 | |
Dollar/Norway | 10.1000 | 10.3530 | -2.25% | +3.12% | +10.3490 | +10.1060 | |
Euro/Norway | 11.2434 | 11.3868 | -1.26% | +7.14% | +11.4120 | +11.2340 | |
Dollar/Sweden | 10.3995 | 10.6608 | -1.32% | -0.08% | +10.6696 | +10.3835 | |
Euro/Sweden | 11.5699 | 11.7241 | -1.32% | +3.78% | +11.7573 | +11.5482 |