* U.S. PCE index unchanged in May, up 2.6% year-on-year
* Fed funds futures slightly lift rate cut chances in September
* Dollar/yen up nearly 6% on the month
* Euro on track for biggest monthly fall since January
By Gertrude Chavez-Dreyfuss
NEW YORK, June 28 (Reuters) - The U.S. dollar fell against the
yen on Friday after data showed inflation in the world's largest
economy cooled down last month, cementing expectations that the
Federal Reserve will start cutting interest rates this year.
The greenback has been on a tear against the yen, underpinned by
wide interest rate differentials between the United States and Japan.
On the year, the dollar has surged 14%.
Earlier in the session, the dollar hit a fresh 38-year high of
161.27 yen. But as inflation cooled, the dollar retreated on Friday,
sliding 0.3% to 160.285 yen.
Data showed the U.S. personal consumption expenditures (PCE) price
index, the Fed's preferred inflation measure, was unchanged last
month, and followed an unrevised 0.3% gain in April, data showed. In
the 12 months through May, the PCE price index increased 2.6% after
advancing 2.7% in April.
"Markets will breathe the sigh of relief that the PCE didn't
really surprise one way or the other," said Carol Schleif, chief
investment officer, at BMO Family Office in Minneapolis.
"It's still indicative of an economy that's coasting,
hopefully to a more sustainable long-term pace, with inflation still
bumping its way downward."
Following the inflation data, fed funds futures slightly
raised the chances of easing in September to around 67%, from about
65% late on Thursday, according to LSEG calculations. The market is
also pricing between one to two rate cuts of 25 bps each this year.
Dollar/yen has been the currency most sensitive to U.S.
economic data because of its high, positive correlation with Treasury
yields. The U.S. currency has posted monthly and quarterly gains
versus the yen of 1.9% and 5.9%, respectively.
In other currencies, the euro was flat $1.0701.
The euro, down 1.3% against the dollar in June, was on track
for its biggest monthly fall since January as political uncertainty
weighed in the run-up to France's general elections.
Against the Swiss franc, the dollar was also little changed at
0.8986 francs.
Currency
bid
prices at
28 June
01:30
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar <=USD 105.9 105.89 0.02% 4.47% 106.13 105.
index > 78
Euro/Doll 685
Dollar/Ye 38
Euro/Yen 46
Dollar/Sw 85
Sterling/ 685
Dollar/Ca 84
Aussie/Do 62
Euro/Swis 1
Euro/Ster 58
NZ 58
llar
Dollar/No 116
Euro/Norw 67
Dollar/Sw 877
Euro/Swed 364
(Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Carolina Mandl; Editing by Sharon Singleton)
US dollar weakens vs yen as inflation moderates
June 28, 2024 at 10:01 am
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