FOREX-Dollar steadies as strong U.S. inflation tempers chance of aggressive Fed rate cut

Reuters

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    * Dollar regroups after losing ground on dovish Fed chair
views
    * Strong U.S. CPI data tempers prospect of 50 bps Fed rate
cut
    * Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

    By Shinichi Saoshiro
    TOKYO, July 12 (Reuters) - The dollar was steady on Friday,
having regained some traction against its peers after
stronger-than-expected U.S. inflation data tempered the prospect
of an aggressive Federal Reserve interest rate cut later this
month.
    The core U.S. consumer price index excluding food and energy
components rose 0.3% in June, the largest increase since January
2018, data on Thursday showed.  urn:newsml:reuters.com:*:nLNSBIEF6Y
    The signs of a pick-up in underlying inflation, along with
separate data on weekly jobless claims showing the labour market
remained solid, curbed financial market expectations of a more
aggressive 50 basis point cut at the Fed's July 30-31 meeting. 
    Markets are still fully priced for a quarter percentage
point cut as U.S. policymakers seek to support a slowing
economy.
    The dollar was little changed at 108.490 yen  JPY=  after
rebounding from a low of 107.860 plumbed on Thursday in response
to dovish comments from Fed Chairman Jerome Powell, which had 
revived the chance of a 50 basis-point cut.
    "The dollar bounced back as the strong U.S. CPI got the
market to question the Fed's view on prices and whether
inflation was really as weak as projected," said Takuya Kanda,
general manager at Gaitame.Com Research Institute.
    "Expectations for a 50 basis point cut had risen after
Powell's comments but were lowered again by the CPI. Until the
Fed's meeting later this month, the prospect of a 50 basis point
cut will continue ebbing back and forth on each major data
release."
    The dollar index  .DXY  against a basket of six major
currencies stood little changed at 97.081 after retracing much
of its losses on Thursday, when it had briefly stooped to a
six-day low of 96.795.
    The euro  EUR=  was flat at $1.1254, having pulled back from
a high of $1.1285 scaled on Thursday prior to the U.S. inflation
data..
    The Australian dollar  AUD=D4  dipped 0.05% to $0.6972 after
gaining 0.2% the previous day.
    The U.S. Treasury 10-year yield  US10YT=RR , which often
dictates the direction of the dollar, was at 2.134% after
jumping 8 basis points overnight on the strong U.S. inflation
data and a weak 30-year bond auction. 

 (Reporting by Shinichi Saoshiro
Editing by Shri Navaratnam)
 ((shinichi.saoshiro@thomsonreuters.com; Reuters Messaging:
shinichi.saoshiro.reuters.com@reuters.net))

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