US dollar buoyant, 10-year yield hits one-month high
Yen falls to over three-month low
US inflation data showed price impact on some heavily imported goods
SINGORE, – The U.S. dollar drew support from elevated Treasury yields on Wednesday, which in turn kept pressure on the yen after the latest U.S. inflation report showed signs that President Donald Trump’s tariffs were beginning to feed into prices.
Rising prices on goods as varied as coffee, audio equipment and home furnishings pulled the inflation rate higher in June, with substantial increases in prices of heavily imported items.
That shored up the dollar and pushed bond yields higher on Wednesday as investors pared back expectations of Federal Reserve interest rate cuts this year.
Against the yen, the greenback rose to a 3-1/2-month peak of 149.19, before pulling back slightly to last trade at 148.91 yen.
The euro and sterling similarly languished near three-week lows hit in the previous session, and last bought $1.1616 and $1.3395, respectively.
The tick up in U.S. prices of core goods “could be a sign that we’re starting to see some inflationary pressure from tariffs creeping in” though it is too soon to tell definitively, said Nathaniel Casey, investment strategist at Evelyn Partners.
“While this inflation report isn’t especially alarming, the tick up in core goods, and the continued uncertainty around future tariff rates could still make the Federal Reserve and Powell hesitant to want to cut rates,” said Casey.
Traders are now pricing in roughly 43 basis points worth of Fed easing by December, down from just above 50 bps at the start of the week.
Focus now turns to U.S. producer price data later in the day for further clues on whether price pressures are indeed beginning to pick up.
U.S. Treasury yields rose slightly on Wednesday, with the benchmark 10-year yield scaling a one-month top of 4.4950%.
The two-year yield steadied at 3.9463%, having risen about 6 bps in the previous session.
Against a basket of currencies, the dollar hovered near a one-month high at 98.54.
Elsewhere, the Australian dollar edged 0.16% higher to $0.6526 after falling 0.45% on Tuesday. The New Zealand dollar rose 0.08% to $0.5950.
Also weighing on investors’ minds was the prospect that Powell’s eventual successor could be someone more inclined to lower interest rates, potentially fuelling price rises.
Trump has railed against Powell for months for not easing and repeatedly urged him to resign. On Tuesday, Trump said cost overruns on a $2.5 billion renovation of the Fed’s Washington headquarters could amount to a firing offence.
“The additional unwanted attention on Powell has given some credence to the notion that we could see his early departure and an early nomination from Trump,” said Molly Schwartz, cross-asset macro strategist at Rabobank.
In trade, Indonesia said on Wednesday it had reached a deal with the United States after an “extraordinary struggle” in negotiations which resulted in a reduction of proposed U.S. tariff rates on Indonesian goods to 19% from 32%.
Trump separately said on Tuesday that a trade agreement with Vietnam was nearly complete. He also said more deals were coming, while offering fresh details on planned duties on pharmaceuticals.
This article was generated from an automated news agency feed without modifications to text.
