The dollar is at a 15-month low due to receding inflation

14 Jul 2023 , 11:20 AM

After plunging overnight, the dollar lingered at 15-month lows on Friday as markets predicted the Federal Reserve was nearing the end of its cycle of rate increases owing to weakening inflation.

At 99.71 in the early Asian hours, the dollar index—which compares the value of the dollar to six significant competitors—was at its lowest level since April 2022. On track to have its worst week since November, the index.

Data released on Thursday revealed that producer prices in the United States barely increased in June and that the annual increase in producer inflation was the lowest in nearly three years. This comes a day after consumer prices inched up slightly last month, adding to mounting evidence that the world’s largest economy has entered a period of declining inflation.

According to the CME FedWatch tool, markets are pricing in a 92% chance of a 25 basis point boost from the Fed later this month but none for the rest of the year.

After Michele Bullock was named governor of Australia’s central bank on Friday, becoming the institution’s first female governor as it underwent a comprehensive reorganization, the Australian dollar weakened 0.16% to $0.688.

In Asian hours, the euro reached a new 16-month high of $1.1229 before tumbling to $1.1222, while sterling last traded at $1.3119, down 0.11% on the day. On Thursday, the pound rose above $1.30 for the first time since April 2022.

The Japanese yen gained 0.23% to 137.71 per dollar and is on track to have its best week since January against the greenback.

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