The
dollar index, which measures the US currency against six major rivals, fell
0.114% to 99.649, having touched a fresh 15-month low of 99.574 earlier in the
session. The index is down 2.5% for the week, its worst weekly run in eight
months.
Investors have been betting on a turn in the dollar for
months, with short positions more than doubling over the month to July 7,
according to data from Commodity Futures Trading Commission, although they
remain far off the levels in 2021.
US producer prices barely rose in June and the
annual increase in producer inflation was the smallest in nearly three years,
data showed on Thursday, a day after data showed consumer prices rose
modestly last month.
"Markets are generally pretty pleasant with the lower
inflation data, because lower inflation together with the still resilient
labour market supports the narrative of a soft landing in the US economy,"
said Carol Kong, currency strategist at Commonwealth Bank of Australia in
Sydney.
"But we still maintain our view that the US will enter
a recession later this year because of the impact of past and potentially
future interest rate hikes."
Markets are still pricing in a 92% chance of a 25 basis
point hike from the Fed later this month, CME FedWatch tool showed, but no more
for the rest of the year.
Data on Thursday also showed that the number of Americans
filing new claims for unemployment benefits unexpectedly fell last week,
indicating that the labour market remains tight even as job growth is slowing.
Fed
officials remain cautious, with Federal Reserve Governor Christopher
Waller saying he's not ready to call an all clear on US inflation and favours
more rate rises this year.
Shane Oliver, head of investment strategy at AMP Capital,
said the Fed is still likely to hike another 25 bps this month on concerns that
services inflation remain too high and worries that stopping too early when the
labour market is still tight could see inflation reignite.
"But that may be it. US inflation also led inflation in
other countries on the way up so its decline augurs well for other
countries".
