Forex — Dollar index drops to 1-week lows after U.S. inflation miss

Dollar turns broadly lower vs. rivals as U.S. data disappoints — The dollar turned broadly lower against the other major currencies on Friday, after the release of disappointing U.S. inflation data dampened expectations for an additional rate hike by the Federal Reserve before the end of the year.

The dollar weakened after the U.S. Commerce Department said that consumer prices rose less-than-expected last month. Another report on Thursday had showed that producer price inflation and its core reading both unexpectedly declined in July.

The weak reports were seen as lowering chances that the Fed will stick to its plans for a third interest rate hike this year.

USD/JPY slid 0.34% to 108.81, the lowest since April 20, while USD/CHF declined 0.38% to 0.9589.

Safe-haven demand remained strong as tensions between Washington and Pyongyang persisted after U.S. President Donald Trump warned the peninsula on Thursday against attacking Guam or U.S. allies and said his first threat to unleash «fire and fury» may have not been tough enough.

North Korea’s state media had earlier said that Pyongyang has the capacity develop a plan by mid-August to launch intermediate-range missiles at the U.S. territory of Guam.

In an attempt to dial down the aggressive rhetoric, U.S. Defense Secretary James Mattis said war would be «catastrophic» and that diplomacy was gaining results.

Elsewhere, EUR/USD advanced 0.48% to 1.1826, reversing earlier losses, while GBP/USD added 0.12% to trade at 1.2992.

The Australian and New Zealand dollars turned higher, with AUD/USD up 0.30% at 0.7890 and with NZD/USD gaining 0.47% to 0.7307.

Data earlier showed that the Business NZ Manufacturing Index ticked down to 55.4 in July from 56.2 the previous month, thus still clearly in expansion territory.

The kiwi had tumbled on Thursday after the Reserve Bank of New Zealand left interest rates unchanged, adding that a lower New Zealand dollar would help increase inflation and achieve more balanced growth.

Meanwhile, USD/CAD retreated 0.60% to 1.2663, pulling away from a one-month peak of 1.2753 reached overnight.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.41% at 92.92, its lowest level since August 4.

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