Asian currencies showed mixed movement on Tuesday, with the U.S. dollar index climbing 0.3% to 99.16 by 15:44 ET, while the Australian dollar edged up 0.1% to $0.7172 following stronger-than-expected consumer price data.
The dollar’s advance came as traders positioned ahead of the U.S. Bureau of Economic Analysis’ July personal consumption expenditures (PCE) report, due later in the session. The core PCE price index, the Federal Reserve’s preferred inflation gauge, rose 0.2% month-over-month and 3.3% year-over-year, matching expectations and remaining above the central bank’s 2% target. Headline PCE increased 0.2% month-over-month and 3.7% year-over-year, slightly exceeding forecasts.
The Australian dollar gained after July CPI rose 0.6% month-over-month and 3.5% year-over-year, a slowdown from June’s 3.8% but still above consensus. The currency’s movement reflected a broader divergence in regional performance, with the yen holding steady below the 160 level against the dollar after Japan’s late-July joint currency intervention.
Elsewhere, the euro dipped 0.2% to $1.1651, while the Canadian dollar weakened 0.3% to $1.3877. The U.S. dollar’s advance trimmed nearly 1% of its losses from the prior week, as markets reassessed the likelihood of a Federal Reserve rate hike in September.
CME FedWatch data showed the probability of the Fed maintaining its current policy rate in September rising to 64%, up from 60% the previous day. Analysts noted that while month-over-month inflation readings showed some deterioration, the year-over-year core PCE figure remained stable, reducing immediate pressure on policymakers.
The U.S. economy’s second-quarter real GDP growth was confirmed at 1.5%, in line with expectations, while durable goods orders for July increased 1.1%, outperforming the 0.4% forecast. The national debt surpassed $40 trillion, adding to the backdrop of fiscal concerns as the November U.S. election approaches.
Federal Reserve Chair Kevin Warsh is scheduled to deliver a keynote address at the Jackson Hole conference on Friday, with markets closely watching for any signals on the timing of future policy adjustments. Analysts suggested that while the Fed could act if inflation pressures intensified, the current data supported a cautious approach ahead of the election.
