New York Forex Market: The U.S. dollar index fell as cooling U.S. inflation undermined interest rate hike expectations
The dollar index fell along with U.S. Treasury yields after U.S. inflation data showed consumer prices fell in June for the first time in six years. The U.S. dollar spot index once fell 0.6%, hitting an intraday low, before narrowing its losses. Previously, Federal Reserve Chairman Kevin Warsh reiterated his commitment to achieving price stability. The core CPI of the United States in June was unchanged from the previous month, and the overall CPI fell by 0.4% from the previous month. Interest rate swap traders cut bets on the Federal Reserve raising interest rates in July; the U.S. 2-year Treasury yield fell 8 basis points to 4.20%. Warsh appeared at congressional hearings on the Fed's semiannual monetary policy report on Tuesday and Wednesday. The market is still focused on the breakdown of the US-Iran ceasefire agreement and the shipping situation in the Strait of Hormuz. Brent rose for the second consecutive day, once exceeding US$87.50 per barrel. High-beta currencies led the gains among G10 currencies against the US dollar, with NZD/USD rising 1% to 0.5810 and USD/NOK falling 1.1% to 9.6830. New Zealand's chief economist Paul Conway said on Tuesday that domestic inflation may not slow as fast as the central bank predicts, signaling the possibility of further interest rate hikes in the future. USD/JPY fell 0.5% to 161.63 before narrowing its losses. Japan's Finance Minister floated the idea of including government bonds in personal tax-free investment plans and said the country's large pension funds would adjust their holdings if necessary. EUR/USD rose 0.4% to 1.1425; GBP/USD rose 0.2% to 1.3378; USD/CHF fell 0.6% to 0.8093. Traders have increased bets on faster interest rate hikes by the Bank of England and the European Central Bank after soaring oil prices reignited concerns about inflation. USD/CAD fell 0.6% to 1.4068. The Bank of Canada will announce its interest rate decision on Wednesday, and the market is expected to keep interest rates unchanged.