HONG KONG, July 15, 2026 – The US dollar extended its decline on Wednesday after falling from a two-week peak, as inflation data came in softer than expected. This development reduced market expectations for a near-term Federal Reserve rate hike, even as elevated oil prices continue to pose inflation risks.

Against the Japanese yen, the dollar slipped 0.1% to 162.08. The euro and British pound each rose 0.1%, trading at $1.1433 and $1.3401 respectively. The New Zealand dollar was strong at $0.5819, near its highest level in a month, while the Australian dollar remained steady at $0.6983. The US dollar index, which tracks the currency against six peers, edged down to 100.81 after a 0.35% drop in the previous session, marking its largest retreat in nearly two weeks from a high last seen on July 2.

Sim Moh Siong, FX strategist at OCBC, said, "The sizeable downside surprise gives the Fed greater scope to remain on hold for longer," noting that Federal Reserve officials had indicated their July decision would depend on June's inflation reading. Following the inflation reports, the probability of a July rate hike was halved to 16%, based on Fed funds futures prices traded at the CME Group.

However, Fed Chair Kevin Warsh tempered optimism during his testimony before the House Financial Services Committee, stating the central bank has "no tolerance" for persistently elevated inflation and vowed to "do my job" if challenged by the US.

CBA economist Samara Hammoud added, "One month of softer-than-expected CPI data will not close the door to interest rate hikes," emphasizing that markets are closely watching upcoming producer price data.

Despite the current softness, some analysts expect modest US dollar appreciation by year-end, though near-term gains may be limited without new catalysts.

Sources