The Japanese yen weakened on Wednesday, approaching the critical threshold of 160 yen per U.S. dollar, keeping investors on alert for potential intervention by Japanese authorities. The U.S. dollar index edged higher after inflation data came in as expected and pushed Treasury yields lower. USD/JPY rose 0.1% to 159.48. "We still believe more intervention could occur at any time," said Alex Cohen, a foreign exchange strategist at Bank of America. He noted that Wednesday's U.S. inflation report did temporarily relieve some of the pressure on the yen. The Bloomberg Dollar Spot Index increased 0.1%.
Data from the U.S. Bureau of Labor Statistics on Wednesday showed that the core Consumer Price Index, which excludes volatile food and energy categories, rose 0.2% month-over-month. On an annual basis, it increased 2.5%, matching the slowest pace of growth since March 2021. "This data supports keeping interest rates unchanged in September," said Paresh Upadhyaya, a strategist at Pioneer Investments. Elias Haddad, global head of market strategy at Brown Brothers Harriman, commented, "The weakening of U.S. inflation pressures strengthens the case for a dovish repricing of the market's expectations for the Federal Reserve's rate hikes, which could further weigh on the dollar and support risk assets."
The Australian dollar was little changed against the U.S. dollar, trading near 0.7063. The New Zealand dollar fell 0.4% to 0.5858, making it one of the worst-performing G10 currencies against the greenback. New Zealand Prime Minister Christopher Luxon stated that the ruling National Party has supported him in continuing to lead the party following a confidence vote. The British pound dipped 0.1% against the U.S. dollar to 1.3491. The euro declined 0.2% to 1.1523.
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