The greenback fell on Thursday (Apr 11) as weaker-than-expected US producer prices for March partly eased market concerns about persistent inflation, suggesting that even with recent strong economic data, interest rate cuts by the Federal Reserve are still firmly on the table.

Data showed the producer price index (PPI) rose 0.2 per cent month on month in March, compared with a 0.3 per cent increase expected by economists polled by Reuters. On a year-on-year basis, it rose 2.1 per cent, versus an estimated 2.2 per cent gain.

“This was a welcome development following yesterday’s hotter-than-expected consumer price report, and indicates that inflationary pressure may have been less widespread in March than initially thought,” Sam Millette, senior investment strategist for Commonwealth Financial Network said in e-mailed comments.

A separate report showed US initial jobless claims were 211,000 for the week ended Apr 6, compared with a forecast for 215,000 claims, suggesting that labour market tightness persisted. The report, however, did not seem to affect the US dollar as investors were focused on inflation.

The greenback slid below 153 yen after the data and was last at 152.92, down 0.2 per cent. Earlier in the session, it hit a high a fresh 34-year high of 153.295 yen.

The yen’s slide has brought intervention fears back, as authorities in Tokyo reiterated they would not rule out any steps to deal with excessive swings.

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Japan intervened in the currency market three times in 2022, as the yen slid towards what was then a 32-year low of 152 to the US dollar.

The US dollar index was slightly down at 105.09. Following the PPI data, the US rate futures market has priced in a 72 per cent chance that the Fed would cut interest rates in September, as this timeline emerged after Wednesday’s hotter-than-expected consumer price index last month, according to the CME’s FedWatch tool.

Fed fund futures have also pared back the number of rate cuts of 25 basis points (bps) this year to under two, or roughly 43 bps, from about three or four a few weeks ago.

The euro was last flat at US$1.0745. Earlier, it fell to a fresh two-month low against the US dollar after the European Central Bank held interest rates at a record high of 4 per cent as expected, but sent a signal that it was preparing for a cut. REUTERS