©Reuters. File image Sheets of five-dollar bills bearing the likeness of former US President Abraham Lincoln seen through a magnifying glass at the Bureau of Engraving and Printing in Washington, US. March 26, 2015. REUTERS/Gary Camero
By John McCrank
NEW YORK, Aug 11 (Reuters) – The dollar extended losses against other majors on Thursday, a day after a report showed U.S. inflation was not as high as expected, prompting traders to lower expectations of interest rate hikes by the Federal Reserve in the future.
* Investors reduced bets on the possibility of the Fed raising rates by 75 basis points (bps) for the third consecutive time when it meets in September, after a report on Wednesday showed that US consumer prices were not changed in July.
* Fed funds futures traders now see a 66% chance of a 50bps hike in September and a 34% chance of a 75bps hike.
* This sent stocks higher and the dollar generally lower as traders readjusted their forecasts to take into account the possibility that inflation, which is at multi-decade highs, may have peaked.
* “Risk appetite has picked up across the financial landscape on the prospect of a less restrictive monetary policy by the Federal Reserve,” said Karl Schamotta, chief market strategist at Corpay.
* By 1445 GMT, it was down 0.257% at 104.95 points, after falling 1% the day before, its biggest daily drop in five months.
* The euro and the yen were some of the currencies that benefited from the weakness of the dollar and both extended their gains from the previous day. The euro was up 0.34% at $1.03345.
* The yen was up 0.22% at 132.59, after rising more than 1% on Wednesday.
(Additional reporting by Iain Withers; Spanish editing by Ricardo Figueroa and Carlos Serrano)