CANBERA (dpa-AFX) - The U.S. dollar weakened against its major counterparts in the New York session on Wednesday, as inflation came in lower than expected in May, reviving hopes for a rate cut by the Federal Reserve in September.
Data from the Labor Department showed that the consumer price index came in unchanged in May after rising by 0.3 percent in April. Economists had expected consumer prices to inch up by 0.1 percent.
Excluding food and energy prices, core consumer prices rose by 0.2 percent in May after climbing by 0.3 percent in April. Core prices were expected to increase by another 0.3 percent.
Meanwhile, the report said the annual rate of consumer price growth slowed to 3.3 percent in May from 3.4 percent in April. Economists had expected the pace of growth to remain unchanged.
The annual rate of core consumer price growth also slowed to 3.4 percent in May from 3.6 percent in April. The pace of growth was expected to dip to 3.5 percent.
Softer-than-expected inflation data raised probability of a rate cut in September.
Investors await the outcome of Fed meeting, which is due at 2 pm ET.
While the Fed is widely expected to leave interest rates unchanged, traders are likely to pay close attention to the accompanying statement as well as officials' latest projections for the economy and interest rates.
The greenback fell to 5-day lows of 0.8892 against the franc and 155.71 against the yen, from yesterday's close of 0.8976 and 157.12, respectively. The currency may locate support around 0.88 against the franc and 149.00 against the yen.
The greenback dropped to 5-day lows of 1.0852 against the euro and 1.3679 against the loonie, from yesterday's closing values of 1.0740 and 1.3758, respectively. The greenback is seen finding support around 1.10 against the euro and 1.33 against the loonie.
The greenback declined to more than a 3-week low of 0.6700 against the aussie and near a 5-month low of 0.6222 against the kiwi, from Tuesday's closing quotes of 0.6606 and 0.6143, respectively. The greenback is likely to challenge support around 0.69 against the aussie and 0.65 against the kiwi.
The greenback touched a fresh 3-month low of 1.2860 against the pound from Tuesday's close of 1.2740. If it drops further, it may find support around the 1.31 area.
At 2:00 pm ET, the Fed announces its decision on interest rate. The central bank is expected to keep its benchmark rate at the target range of 5.25 percent to 5.5 percent.
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