FOREX-US dollar eases after slightly hotter inflation, jobless claims uptick

By Gertrude Chavez-Dreyfuss

NEW YORK, Sept 11 (Reuters) - The U.S. dollar slipped on Thursday after modestly hotter August inflation data and weaker-than-expected initial jobless claims reinforced the view that the Federal Reserve will resume cutting interest rates next week.

In morning trading, the dollar was last slightly down against the yen at 147.42 yen JPY=EBS, while the euro rose 0.3% to $1.1731 EUR=EBS. As a result, the dollar index, a measure of the greenback's value against six major currencies, dipped 0.2% to 97.62 =USD.

U.S. consumer prices rose more than expected in August while the annual increase in inflation was the largest in seven months. The Consumer Price Index increased 0.4% last month after increasing 0.2% in July, the Labor Department's Bureau of Labor Statistics said.

In the 12 months through August, the CPI advanced 2.9%, the largest increase since January, after climbing 2.7% in July.

More importantly, initial claims for state unemployment benefits jumped 27,000 to a seasonally adjusted 263,000 for the week ended September 6, data showed. Economists polled by Reuters had forecast 235,000 claims for the latest week.

"For the first time in a long time, CPI is being overshadowed on its release day by another data series," wrote Josh Jamner, senior investment strategy analyst at ClearBridge Investments in emailed comments.

He noted that the spike in initial jobless claims to the highest level in four years had helped briefly push the 10-year Treasury yield below 4%, despite the larger-than-expected increase in the consumer price index.

"This dynamic illustrates the Fed's focus on the 'maximum employment' half of the dual mandate, with today's inflation print not hot enough in our view to derail a 25 basis point interest rate cut at next week's FOMC meeting."

Attention on the labor market has intensified after two poor U.S. jobs reports over the last few days. The non-farm employment number for August showed just 22,000 jobs created compared with forecasts of 75,000, while payrolls were revised downwards by 911,000 for the April 2024 to March 2025 period.

Following Thursday's data, fed funds futures are pricing in a 91% chance of a 25 bp cut this month and a 9% chance of a 50 bp decline, according to the CME's FedWatch. That was unchanged from levels late on Wednesday.

In other currency pairs, the dollar fell 0.3% versus the Swiss franc to 0.7966 CHF=EBS, while sterling gained 0.2% to $1.3552 GBP=D3.