Dollar in holding pattern as US inflation test looms; PBOC supports yuan

economictimes.indiatimes.com:

dollar held near the centre of its range this week against a basket of major peers, as investors awaited key U.S. inflation data later Thursday that could influence the path for Federal Reserve policy. The U.S.

currency edged to a one-month high versus the yen as markets took the view that the Bank of Japan will be slow to exit stimulus, even with traders mostly betting the Fed is done with rate hikes. The Australian and New Zealand dollars hovered close to two-month lows amid a worsening economic outlook for key trade partner China. The yuan pulled a bit further from a one-month trough after the People's Bank of China again set a stronger than expected official exchange rate in a sign of displeasure at recent weakness The U.S.

dollar index — which measures the currency against six counterparts, including the euro and yen — was little changed at 102.50 in the Asian morning, after trading roughly between 101.98 and 102.80 this week. The dollar has benefited from safe-haven demand in the wake of an ongoing run of poor Chinese economic data, while the narrative continues to build for a soft landing for the U.S. economy as price pressures mitigate.

Wall Street economists forecast the core consumer price index (CPI) to have risen 4.8% year-on-year in July, unchanged from the previous month. Money markets currently lay 86.5% odds for the Fed to forgo another rate hike at its September meeting, and foresee the next move as a cut, likely in spring of next year. However, a climb in crude oil prices, which settled at its highest since January overnight, has clouded the outlook, according to IG market analyst Tony Sycamore.