The U.S. dollar moved slightly lower on Thursday after the Federal Reserve’s June meeting minutes appeared less hawkish than investors had expected.
However, losses remained limited. Renewed U.S.-Iran military tensions kept markets cautious, as investors worried about sticky inflation and the possibility of higher interest rates.
Major Currencies Firm Against the Dollar
The Chinese yuan edged higher after mixed June inflation data.
The Japanese yen stayed near 40-year lows, keeping traders alert to possible intervention from Japanese authorities.
Meanwhile, the euro and the British pound each gained 0.2% in early trade.
Dollar Index Slips After Volatile Session
The dollar index fell 0.1% on Thursday after a volatile overnight session.
At first, renewed U.S.-Iran tensions supported demand for the dollar. But the currency later reversed course after Fed minutes showed policymakers were divided over the need for further rate hikes.
Still, the dollar remained close to recent 13-month highs.
Fed Inflation Concerns Remain in Focus
Federal Reserve officials continued to highlight inflation as a major risk.
Markets remain sensitive to any signs that inflation could stay elevated. If price pressures remain sticky, the Fed may have more reason to raise interest rates again.
Inflation concerns increased this week as oil prices rallied following renewed U.S.-Iran military action.
The United States launched several attacks against Iran, while President Donald Trump said a ceasefire with Tehran was now over.
Chinese Yuan Steady After Inflation Data
The Chinese yuan was little changed on Thursday after mixed June inflation figures.
The USD/CNY pair fell around 0.1%, reflecting a slightly firmer yuan.
China’s consumer price index rose 1% year-over-year in June. This missed forecasts of 1.1% and slowed from 1.2% in the previous month.
The data pointed to continued weakness in consumer demand and spending.
Producer Prices Rise on Energy Costs
China’s producer price inflation rose sharply to a four-year high of 4.1%.
Higher energy and commodity costs, driven partly by Middle East disruptions, pushed input prices higher.
Stronger producer inflation could eventually feed into consumer prices if companies pass higher costs on to customers.
PBOC Rate Cut Still Possible
ING analysts said China’s inflation data showed a move away from near-deflation toward low positive inflation.
They added that this level of inflation is unlikely to stop the People’s Bank of China from easing policy if needed.
A Chinese interest-rate cut could put pressure on the yuan. However, ING does not expect major downside for the currency in the coming months.
Yen Weakness Keeps Intervention Risk Alive
The Japanese yen remained close to its weakest levels in 40 years.
The USD/JPY pair slipped 0.1%, but the yen stayed under pressure overall.
Persistent yen weakness has kept investors alert to possible intervention from Tokyo, especially after repeated warnings from Japanese officials.
Australian Dollar Rises, Won Stays Flat
The Australian dollar edged slightly higher against the U.S. dollar.
The South Korean won was mostly unchanged, as traders continued to monitor increased volatility in local equity markets.
