Dollar Slips as Oil Prices Drop and CPI Data Releases
The dollar index fell 0.10% today. This move followed a sharp decline in crude oil prices. The drop in oil pushed down US Treasury yields.
The dollar index DXY decreased by 0.10% on the day. This decline coincided with a drop of more than 2% in WTI crude oil prices. The fall in oil costs caused the 10-year T-note yield to drop by 3.5 basis points. Despite this weakness, the currency maintained support from recent inflation data.
US CPI data for August showed a 0.4% month-over-month increase. This figure matched market expectations. Core CPI rose by 0.3% month-over-month, slightly exceeding forecasts. The year-over-year core CPI printed at 2.4%, a five-and-a-half-year low. These numbers raised the probability of a Federal Reserve rate hike to 88%.
Consumer Sentiment Misses Expectations
The University of Michigan’s preliminary consumer sentiment index fell to 47.8. This represented a 3.9-point drop from the previous month. Analysts had expected a much smaller decline to 51.3. The weaker-than-expected reading undercut the dollar during the trading session.
Oil Supply Risks Dominate Markets
October WTI crude contracts lost more than 2% of their value. This erased part of the 6.7% gain seen on Thursday. The International Energy Agency warned of a major drop in global oil demand. High prices and restricted supply drive this forecast. Saudi Arabia reported August production at 6.238 million barrels per day, the lowest since 1990.
Reports indicate two ships were struck near Oman. These incidents heighten tensions in the Bab el-Mandeb Strait. Saudi Crown Prince Mohammed bin Salman reportedly urged the US for action against the Houthis. These geopolitical factors keep a floor under long-term oil prices.
Yen Strengthens on Rate Hike Bets
The Japanese yen gained as oil prices fell. Japan imports over 90% of its energy needs. BOJ Board member Kazuyuki Masu stated the bank will continue raising rates. He warned of a rapid hike if inflation accelerates. The market prices a 97% chance of a 25 basis point hike on September 18.
Speculation around the Government Pension Investment Fund also supports the yen. The fund holds $2.1 trillion in assets. Rising Japanese government bond yields have fueled talk of a reallocation. December COMEX gold prices rose by $11.00 to gain 0.25%. Silver prices increased by $0.373, a 0.57% rise. These moves reflect the weaker dollar and lower oil costs.
