Dollar Holds Steady Amid Inflation Data and Central Bank Watch

• Dollar steadies after August PPI falls 0.1%, Fed rate cut likely in September.

• Trump administration appeals Fed governor firing; Miran nomination advances ahead of September meeting.

• Dollar steady vs yen; euro up to $1.1698; Aussie, yuan rise;

The U.S. dollar steadied in early Asian trading on Thursday following an unexpected 0.1% decline in the Producer Price Index (PPI) for final demand in August, as reported by the Labor Department’s Bureau of Labor Statistics. This drop, following a revised 0.7% increase in July, has reinforced market expectations that the Federal Reserve will reduce interest rates at its upcoming September meeting. The dollar index edged up to 97.822, marking its third consecutive day of gains. 

Rodrigo Catril, currency strategist at National Australia Bank, noted the market is pricing in a Fed easing this year, potentially three times, with the recent PPI figures confirming current pricing expectations. Traders see at least a 25 basis point cut as certain, with an 8% probability of a larger 50 bps cut according to CME Group’s FedWatch tool.

Attention remains on appointments to the Fed’s rate-setting panel amid political developments. The Trump administration appealed a federal court ruling that temporarily blocked the president’s attempt to remove Federal Reserve Governor Lisa Cook before the policy meeting next week.

Meanwhile, Stephen Miran’s nomination to the Federal Reserve advanced after the Senate Banking Committee’s approval, although uncertainty remains regarding the timing of his confirmation and participation in the September 16-17 meeting. These moves reflect ongoing efforts by the administration to influence interest rate decisions directly.

In currency markets, the dollar held steady against the yen at 147.41 after Japanese wholesale prices rose 2.7% year-on-year in August, indicating persistent inflation pressures. The euro gained slightly to $1.1698 ahead of the European Central Bank’s policy meeting, where rates are expected to remain unchanged.

Analysts expect a dovish tone to address ongoing trade and political uncertainties, including recent events such as Poland intercepting suspected Russian drones with NATO support amid tensions in Eastern Europe. The Australian dollar increased marginally to $0.66165, supported by commodity price gains in iron ore, crude oil, and near-record gold levels. The offshore yuan rose 0.03% to 7.1184 per dollar, while New Zealand's kiwi dipped slightly to $0.59375. Sterling remained stable at $1.3527.