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Currencies
Last Updated: July 12, 2023 at 4:59 p.m. ET First Published: July 12, 2023 at 11:15 a.m. ET
The dollar fell to its lowest close since April 2022
The dollar retreated on Wednesday after inflation data for June cooled more than anticipated.
Getty Images
[]The U.S. dollar fell Wednesday after the consumer-price index for June showed the rate of inflation slowing to the lowest level since 2021.
[]The ICE U.S. Dollar Index DXY, -0.16%, a measure of the currency against a basket of six major rivals, fell to 100.55 as of 4:30 p.m. Eastern on Wednesday, the lowest level since April 20, 2022, according to Dow Jones Market Data.
[]The index dropped 1.2% on Wednesday, the largest percentage decrease since Nov. 11, 2022.
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[]Data released Wednesday showed that the U.S. consumer prices rose a modest 0.2% in June, while economists polled by The Wall Street Journal forecast a gain of 0.3%. The yearly rate of inflation decelerated to 3% from 4% in the prior month, the lowest since March 2021.
[]Fed fund futures traders are still pricing in an over 90% chance that the Fed will raise its benchmark interest rate by 25 basis points in its meeting later this month, according to CME Fed Watch. They are pricing in a 21% likelihood that the U.S. central bank will raise interest rates for one more time after July. That is down from 32.4% a day ago.
[]The Fed’s policy rate currently sits in a range of 5%-5.25%, its highest since 2007.
[]Meanwhile, the dollar typically trades according to expectations for U.S. rates relative to the rest of the world. While the Fed is seen as closer to completing its most aggressive rate-hike campaign of the past four decades, policy makers in Europe and the U.K. are possibly set up to boost borrowing costs further.
[]This “draws capital away from the dollar towards currencies where rates are still expected to move higher,” said Stephen Kolano, managing director of investments at Massachusetts-based Integrated Partners.
[]Indeed, the euro advanced against the dollar, pushing the EUR/USD pair up by 1.1% to its highest level in more than a year. The British pound also gained versus the greenback, lifting the GBP/USD pair higher by 0.4% to the highest since April 2022 as of Wednesday afternoon.
[]U.S. stocks finished higher Wednesday, with the Dow Jones Industrial Average DJIA, +0.25% up 0.3% and the S&P 500 SPX, +0.74% up 0.7%. The Nasdaq Composite COMP, +1.15% gained 1.2%, according to FactSet data.
‘Like a drunk stumbling across the highway.’ How one fund is preparing for market turmoil even as stocks have surged.
[] After a sensational 2022 when the world turned upside down — the SG CTA index returned 20.1% last year — this year that index is flat. One manager explains his strategy.
[]Frances Yue covers the cryptocurrency market for MarketWatch.
[]Vivien Lou Chen is a Markets Reporter for MarketWatch. You can follow her on Twitter @vivienlouchen.
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