The US dollar traded at multi-week lows against the euro and sterling on Wednesday, after U.S. inflation data. unexpectedly weak strengthened the view that the Federal Reserve will not raise interest rates early Thursday morning.
China's yuan currency also fell to its weakest level in more than six months after the central bank cut rates, and speculation grew that more stimulus was in the works to support the economic recovery.
The US dollar index which measures the greenback against six major currencies traded down 0.5% to trade at 102.395 and has hit its lowest level since May 22.
In May, the U.S. consumer price index (CPI) posted the smallest year-on-year increase since March 2021 at 4.0%. The odds of the Fed raising rates by a quarter point have dropped from around 21% to below 5%.
According to MUFG strategist Lee Hardman, the market expects the Fed to hold off on rate hikes for a while. There are fairly high hurdles for (the Fed) to deliver a hawkish shock tonight through rhetoric alone.
On the other hand, the Reserve Bank of Australia and the Bank of Canada have chosen to raise interest rates. Unsurprisingly, the dollar has lost gains against the Australian dollar, which has gained 4.3%, followed by the Canadian dollar, which has strengthened by 2%.
The euro has been recovering from a 2-1/2 month low in late May and was last up 0.1% at $1.0805. The European Central Bank (ECB) delivered its decision on rates on Thursday, with a quarter-point increase to 3.50% widely expected.
Sterling, meanwhile, strengthened 0.59% to trade at a one-month high of $1.2685, on track for a 1.1% gain in two days.
