Forex — Dollar trims losses but U.S. data still weighs

Dollar eases off 1-week lows vs. rivals but upside limited — The dollar trimmed losses against the other major currencies on Friday, but it remained under pressure as the release of disappointing U.S. inflation data dampened expectations for an additional rate hike by the Federal Reserve this year.

The dollar weakened after the U.S. Commerce Department said consumer prices rose less-than-expected last month. A separate report released a day earlier showed that producer price inflation and its core reading both unexpectedly declined in July.

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

USD/JPY was almost unchanged at 109.16, after hitting a four-month low of 108.74 earlier in the session, while USD/CHF held steady at 0.9624.

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, US Defense Secretary James Mattis said war would be «catastrophic» and that diplomacy was gaining results.

Elsewhere, EUR/USD rose 0.20% to 1.1795, reversing earlier losses, while GBP/USD was little changed at 1.2983.

The Australian dollar was steady, with AUD/USD at 0.7878, while NZD/USD gained 0.32% to 0.7297.

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 0.42% to 1.2691, off a one-month peak of 1.2753 hit overnight.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.14% at 93.16, just off a one-week low of 92.88 reached earlier in the session.

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