Dollar Declines Ahead Of Inflation Data

08:27, 17th August 2011

(RTTNews) - The dollar remained under pressure versus other major currencies Wednesday morning, dropping to its lowest since July versus the euro.

Risk appetite was picking up a bit ahead of pivotal U.S. inflation data, weighing on the dollar.

The Labor Department will release data on the July producer price index at 8:30 a.m. ET. July PPI is forecast to show a 0.1 percent rise after a 0.4 percent decline in June. Core PPI, which strips out food and energy costs, is forecast to show a 0.2 percent increase.

The buck has tumbled versus the euro despite concerns about the euro zone debt crisis. Yesterday's meeting of French President Nicolas Sarkozy and German Chancellor Angela Merkel failed to produce a coherent plan to backstop their debt-ridden neighbors.

However, the leaders shored up their defense of the euro.

"We want to express our absolute will to defend the euro and assume Germany and France's particular responsibilities in Europe and to have on all of these subjects a complete unity of views," said Sarkozy.

The buck dropped to $1.4505 versus the euro, and slid to a 2-month low of $1.6531 against the sterling.

Euro zone inflation fell in July, although it remained above the European Central Bank's target.

The European Union's official statistics agency Eurostat said consumer prices fell by 0.6 percent from June, but were up 2.5 percent from July 2010.

The buck slipped to Y76.49 versus the yen, toward this month's record low of Y76.28.

On the other hand, the dollar was steady versus the Swiss franc after Swiss authorities signaled their determination to weaken the franc after a dramatic run to record highs.

The Swiss National Bank said the currency "remains massively overvalued" despite easing from all-time highs versus the euro and dollar.

"The measures taken thus far by the Swiss National Bank against the strength of the Swiss franc are having an impact. Nevertheless, the Swiss franc remains massively overvalued," the SNB said in a statement. The SNB recently cut interest rates to zero and has taken steps to increase liquidity.

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