TOKYO- The dollar held firm on Monday after slightly softer-than-expected US inflation did little to chip away investors’ conviction that the Federal Reserve could tighten monetary policy if consumer price pressures continue to intensify.
The dollar’s index against six other major currencies was steady at 91.793, having recovered from Friday’s low of 91.524 hit in the wake of the inflation readings.
The euro was little changed at $1.19385, struggling to recover the $1.20 level while the dollar consolidated at 110.80 yen, not far from Wednesday’s 15-month high of 110.105.
The US personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased 0.5 percent after advancing 0.7 percent in April.
In the 12 months through May, the so-called core PCE price index, the Fed’s favorite gauge of inflation, shot up 3.4 percent, the largest gain since April 1992.
Although inflation is expected to slow towards the year-end, signs of a tight labor market kept many investors fretting over wage-driven price pressures.
Among a raft of economic indicators due this week, Friday’s payroll data is a key focus, with economists expecting an increase of 675,000 nonfarm payrolls.
“Depending on the outcome of the payroll’s data, the market could start pricing in more chances of a rate hike next year,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.
