US dollar gains on yen after consumer price data

[TOKYO] The US dollar gained against the Japanese yen and was little changed against the euro on Tuesday (Jul 15) in choppy trading, after data showed US consumer price inflation was close to economists’ expectations in June.

Core consumer prices rose by 0.2 per cent in the month, for an annual gain of 2.9 per cent, below economists’ projections for a 0.3 per cent and 3.0 per cent gain, respectively.

Headline inflation was as expected for the month, rising by 0.3 per cent, but posted an annual increase of 2.7 per cent for the year, compared with expectations for a 2.6 per cent gain.

The euro was last up 0.03 per cent on the day at US$1.1667, paring an earlier knee-jerk rally on the data. Against the Japanese yen, the greenback strengthened 0.26 per cent to 148.09.

Bitcoin eased back to around US$116,650, below Monday’s all-time high of US$123,153.22 following a 14 per cent surge in the space of a week, as investors bet on long-sought legislative policy wins for the cryptocurrency industry this week.

The euro was steady around US$1.16698, after four straight days of losses.

Against the yen, the US dollar was little changed at 147.92, after earlier rising to the highest since Jun 23 at 147.89 yen.

The dollar index, which tracks the greenback against the yen, euro and four others, held at 98.097, just below the overnight peak of 98.136, the highest since Jun 25.

US Federal Reserve chair Jerome Powell has said he expects inflation to increase this summer as a result of tariffs, which is seen keeping the US central bank on hold until later in the year.

Economists polled by Reuters expect headline inflation to increase to 2.7 per cent on an annual basis, up from 2.4 per cent the prior month. Core inflation is expected to rise to 3.0 per cent, from 2.8 per cent.

“Should inflation fail to materialise or remain steady, questions may arise regarding the Fed’s recent decision not to cut rates, potentially intensifying calls for monetary easing,” James Kniveton, senior corporate FX dealer at Convera, wrote in a client note.

“Calls from the White House for leadership changes at the Fed may increase.”

US President Donald Trump on Monday renewed his attacks on Powell, saying interest rates should be at 1 per cent or lower, rather than the range of 4.25 to 4.50 per cent range the Fed has kept the key rate at so far this year.

Fed funds futures traders have been pricing in about 50 basis points of interest rate cuts by year-end, with the first quarter-point reduction seen as likely in September.

Currencies barely reacted to data showing China’s economy grew 5.2 per cent last quarter, slightly topping analysts’ forecasts – in a sign of resilience against US tariffs.

The pound rose 0.15 per cent to US$1.1668 ahead of Bank of England governor Andrew Bailey’s annual “Mansion House” address to London’s financial sector on Tuesday, along with finance minister Rachel Reeves. REUTERS