Dollar heads for fourth week of gains, inflation boosts interest ‎expectations

US dollar is heading for a fourth week of gains today, Friday, after data showed that inflation did not rise as strongly in America as expected in July, which helped boost investor expectations that the US central bank will likely end the current interest rate hike cycle.

According to Reuters, the dollar’s rise puts the Japanese yen on the path to testing a major support level, despite the lack of liquidity today, which coincides with a holiday in Japan.

Yen settled at 144.72 against the dollar in early Asian trading after it was traded at 144.89 earlier, its lowest level since June 30 when it breached the 145 level against the dollar, which is the level that investors believe the Bank of Japan may intervene at.

Japan intervened in September last year when the dollar rose and exceeded 145 yen, and the yen fell to 158.98 against the euro, which is just below the 15-year peak it touched on Thursday at 159.19.

Meanwhile, British pound also rose for the first time in 4 days after data showed that the British economy expanded more than expected in June, which calmed some concerns about the impact of rising inflation and raising interest rates on activity.

The pound sterling rose in the latest trading 0.3% to 1.2711 dollars, but it is still heading towards decline for the fourth week.

Data published yesterday showed that the consumer price index in the United States rose 0.2 percent last month, the same rate recorded in June, while the index increased 3.2 percent in July on an annual basis.

Slowing inflation, along with slowing job growth, reinforced experts’ expectations that the US central bank would be able to manage a “soft landing” for the economy.

Futures dealers expect by nearly 90% that the Federal Reserve will leave interest rates in their current range of 5.25-5.5% when it meets in September.

The dollar index, which measures the value of the US currency against 6 competing currencies, declined by 0.1% to 102.50 points, but is heading for gains for the fourth week in a row, due to reasons including the high yield on Treasury bonds, while the euro rose 0.1% to $1.0995.