By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) -The dollar fell on Thursday as weaker-than-expected U.S. producer prices for March partly eased market concerns about persistent inflation, suggesting that even with recent strong economic data, interest rate cuts by the Federal Reserve are still firmly on the table.
Data showed the producer price index (PPI) rose 0.2% month-on-month in March, compared with an 0.3% increase expected by economists polled by Reuters. On a year-on-year basis, it rose 2.1%, versus an estimated 2.2% gain.
“This was a welcome development following yesterday’s hotter-than-expected consumer price report and indicates that inflationary pressure may have been less widespread in March than initially thought,” Sam Millette, senior investment strategist for Commonwealth Financial Network said in emailed comments.
A separate report showed U.S. initial jobless claims were 211,000 for the week ended April 6, compared with a forecast for 215,000 claims, suggesting that labor market tightness persisted. The report, however, didn’t seem to affect the dollar as investors were focused on inflation.
The greenback slid below 153 yen after the data and was last at 152.92, down 0.2%. Earlier in the session, it hit a high a fresh 34-year high of 153.295 yen.
The yen’s slide has brought intervention fears back as authorities in Tokyo reiterated they would not rule out any steps to deal with excessive swings.
Japan intervened in the currency market three times in 2022 as the yen slid toward what was then a 32-year low of 152 to the dollar.
The dollar index was slightly down at 105.09.
Following the PPI data, the U.S. rate futures market has priced in a 72% chance that the Fed would cut interest rates in September, as this timeline emerged after Wednesday’s hotter-than-expected consumer price index last month, according to the CME’s FedWatch tool.
Fed fund futures have also pared back the number of rate cuts of 25 basis points (bps) this year to under two, or roughly 43 bps, from about three or four a few weeks ago.
The euro was last flat at $1.0745. Earlier, it fell to a fresh two-month low against the dollar after the European Central Bank held interest rates at a record high of 4% as expected but sent a signal that it is preparing for a cut.
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting Alun John in London; editing by Jonathan Oatis)
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