The US dollar remained under pressure on Thursday, holding near multi-month lows as market participants awaited the US producer price index later in the session.
The release could shape expectations ahead of Friday’s consumer inflation data, with an upside surprise potentially providing the catalyst for a near-term rebound in the currency by reinforcing expectations of tighter monetary policy.
Treasury yields stabilised after rising in the previous session. The move followed the Treasury’s announcement that it would repurchase USD 6 billion of longer-dated debt, three times the size of its standard operation.
However, the increase fell short of some market expectations, helping push the 10-year yield to its highest level in multiple years. At the same time, elevated oil prices amid continued tensions in the Middle East have kept inflation concerns firmly in place, with markets assigning around a 60% probability to an interest rate increase at next week’s Federal Reserve meeting.
Attention also turns to weekly jobless claims and the European Central Bank’s decision later today. A 25-basis-point increase is widely expected, with a further move still anticipated before year-end, potentially adding pressure on the dollar against the euro. In Japan, faster tightening expectations could also dampen the dollar’s outlook.
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