The International dollar index traded just below 110 on Thursday, holding its recent advance and hovering near a 20-year high, underpinned by expectations that the Federal Reserve will need to move even more aggressively to combat inflation.
While Gold prices weakened toward $1,690 an ounce on Thursday, approaching the lowest levels in over two years, weighed down by a strong dollar index and International expectations that the US Federal Reserve will continue to raise interest rates aggressively to combat inflation.
US consumer prices unexpectedly rose 0.1% in August from a month ago despite expectations for a 0.1% contraction, while the annual rate eased less than expected to 8.3%.
Also gold is considered a hedge against inflation and economic uncertainties, higher interest rates raise the opportunity cost of holding non-yielding bullion, denting its appeal.
Meanwhile, producer prices fell for the second straight month in August, providing investors some relief. Markets are currently expecting the Fed to deliver its third straight 75 basis point rate hike next week.
While International fed funds futures are pricing a 37% chance of a bigger 100 basis point increase. The dollar index held its recent gains against the euro, sterling and antipodean currencies, while fluctuating against the yen on concerns about a possible intervention.
Meanwhile, US producer prices fell for the second straight month in August, providing markets some relief. International Monetary Fund chief Kristalina Georgiva also said on Wednesday that central banks must be “stubbor