CURRENCIES: Dollar Retreats As Traders Brace For Friday's Key Inflation Report

By Barbara Kollmeyer, MarketWatch , Anneken Tappe Features Dow Jones Newswires

Swiss franc and Japanese yen continue to gain as U.S.-North Korea tensions continue

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The U.S. dollar on Thursday softened against most of its key rivals as the global market worried about a potential clash between the U.S. and North Korea, and braced for a closely watched inflation on Friday.

The dollar slipped 0.5% against the Swiss franc on Thursday, buying 0.9629 franc, compared with 0.9636 Swiss franc late Wednesday in New York. On Wednesday, the Swiss currency rallied as investors flocked to assets considered safe,after North Korean leader Kim Jong Un threatened to strike the U.S. territory of Guam (http://www.marketwatch.com/story/north-korea-details-plan-to-fire-missiles-toward-guam-says-only-absolute-force-will-work-with-trump-2017-08-09).

On Thursday, tensions between Pyongyang and Washington remained elevated, with President Donald Trump saying in an interview with media at his golf resort in Bedminster, N.J. that his warning of "fire and fury (http://www.marketwatch.com/story/trump-today-president-says-north-korea-faces-fire-and-fury-if-it-doesnt-halt-threats-2017-08-08)" against North Korea if it continued to maintain its threatening posture wasn't severe enough (http://www.marketwatch.com/story/trump-today-president-tweets-get-back-to-work-at-senate-majority-leader-mcconnell-2017-08-10).

Richard Perry, market analyst at Hantec Markets, said currency traders "are so inexperienced in this game of foreign policy that their bravado could stumble into a conflict situation." That means volatility in the currency market may be heightened until the North Korean drama subsides.

The dollar had been stronger in the earlier hours of Thursday trade, but pressure on greenback also coincided with signs of sluggish inflation. which have held in check the buck. Tepid inflation may force the Federal Reserve to hold back on lifting rates further as sluggish prices and inflation float below its 2% target, a level considered ideal for a healthy economy.

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The U.S. producer-price index also missed expectations and dipped 0.1% versus a 0.1% growth forecast.

"The PPI miss was a bit disappointing and people might now be less optimistic about Friday's inflation figures," Viraj Patel, FX strategist at ING said, referring to a report on consumer prices, or CPI due Friday from the Bureau of Labor Statistics.

U.S. consumer price numbers will be reported at 8.30 a.m. Eastern. Consensus estimates put the CPI at 1.8% year-over-year, and 1.7% excluding food and energy.

Meanwhile on the domestic front, U.S. initial jobless claims for the week ended August 5 exceeded consensus estimates (http://www.marketwatch.com/story/us-jobless-claims-rise-by-3000-to-244000-2017-08-10), recording 244,000 versus 240,000 expected this morning. Continuing jobless claims reduced to 1,951,000 from 1,967,000 before.

Low inflation has confounded the Fed because theoretically strong employment should lead to rising prices.

A broader measure of the dollar, the ICE Dollar index , which compares the buck to six rivals, tipped into negative territory at 93.4870 on Thursday, shedding 0.2%. Against the yen, the greenback traded down at Yen109.20 versus Yen110.06 late on Wednesday.

In more U.S. economic news, New York Fed Go. William Dudley said modest wage growth is reflection of sluggish productivity (http://www.marketwatch.com/story/feds-dudley-says-modest-wage-growth-reflects-sluggish-productivity-2017-08-10) in a speech earlier on Thursday.

The euro bought $1.1775, compared with $1.1760 late Wednesday in New York. The pound slipped to $1.2982, compared with Wednesday's level of $1.3004, after initially rising above it in earlier trading on Thursday.

Meanwhile, the Canadian dollar saw volatile action on the back of low oil prices and the global risk sentiment on Thursday, Patel continued. The currency slipped against its U.S. counterpart, with one Canadian dollar buying $0.7857, compared with $0.7875 late on Wednesday in New York.

Elsewhere, the New Zealand dollar weakened against its U.S. counterpart after Reserve Bank of New Zealand's Gov. Graeme Wheeler and Assistant Gov. John McDermott said the kiwi needed to weaken--possibly through intervention by the central bank. Previously, the central bank only considered a weaker currency as helpful to economic policy.

One New Zealand dollar bought $0.7287, compared with $0.733 late Wednesday in New York.

(END) Dow Jones Newswires

August 10, 2017 15:44 ET (19:44 GMT)