Dollar Holds Steady as Fed Rate Cut Bets Grow Ahead of CPI Data

The U.S. dollar stabilized in early Asian trade Thursday as traders awaited consumer price data after an unexpected drop in factory-gate prices fueled expectations of a Federal Reserve rate cut next week. The dollar index edged up to 97.822, its third straight day of gains, following a 0.1% decline in August’s Producer Price Index after July’s revised 0.7% jump. Analysts said the softer data strengthened the case for easing, with markets pricing a 25 basis point cut as certain, and an 8% chance of a larger 50 basis point move, according to CME’s FedWatch tool.

Political focus also turned to the Fed’s leadership. The Trump administration is appealing a court ruling blocking its effort to remove Governor Lisa Cook before the September 16–17 policy meeting. Meanwhile, Stephen Miran’s nomination advanced in the Senate Banking Committee, though approval in time for next week’s meeting remains uncertain.

In currencies, the dollar traded flat at 147.41 yen after Japanese wholesale prices rose 2.7% year-on-year in August, signaling persistent inflation. The euro edged higher to $1.1698 ahead of the European Central Bank’s decision, where rates are expected to remain unchanged but policymakers may adopt a dovish tone amid geopolitical and trade risks. Sterling was steady at $1.3527.

Elsewhere, the Australian dollar rose to $0.66165, supported by strong commodities including iron ore, crude oil, and gold near record highs. The offshore yuan firmed slightly to 7.1184 per dollar, while the New Zealand dollar slipped to $0.59375.

Geopolitical tensions also weighed on sentiment, with Poland announcing it shot down suspected Russian drones with NATO backing, the first such action since the Ukraine war began.