The US Dollar solidifies its position in the forex market despite the absence of new breakthroughs in major pairs.

Dollar traders are enthusiastic in the face of US producer inflation data that surpassed estimates after being hit by consumer inflation data yesterday. The US Dollar Index (DXY) tested the 102.80 range again in the New York session on Friday, August 11th.

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The US Department of Labor reported that the Producer Price Index (PPI) increased by 0.3% (month-over-month) in July 2023. This growth was higher than both the June data and market estimates. Meanwhile, the year-over-year PPI surged by 0.8% in July, following a 0.2% increase in June.

The increase in producer inflation is likely insufficient to compel The Fed to raise interest rates further in September, keeping the current interest rate expectations the same as after the last FOMC announcement. However, there is a possibility that The Fed may raise rates again at the end of the year if other inflation data also increases in upcoming periods.

"The PPI data shows that inflation is still a concern," said Adam Sarhan, chief executive of 50 Park Investments.

"The market needs to pause and digest the inflation data coming in mixed, where it's not clear what the Fed will do next. Even if the Fed pauses one time, the question becomes what will it be doing for the rest of the year," Sarhan added.

Wall Street stock exchange tends to be under pressure in response to the release of this PPI data. Meanwhile, the US Treasury 2-year Bonds yield immediately surged to 4.9%.

The US Dollar also solidifies its position in the forex market, despite the absence of breakthroughs in major pairs. Market liquidity is relatively low as the week ends, while fluctuations in several currency pairs tend to be limited as a critical threshold approaches.

The market is once again focusing on USD/JPY. The duo, nicknamed the "Ninja," continues its rally to the highest level of 144.97 as of the time of writing, placing it three pips below the 145.00 threshold. Analysts have long cautioned that the 145.00 and/or 150.00 thresholds could potentially trigger intervention by the Bank of Japan in the forex market. Tokyo will likely be displeased with the yen exchange rate exceeding those thresholds.

"You should expect the rhetoric once the yen gets to 145," said Bank of Singapore currency strategist Moh Siong Sim. "I think the market will get much more careful as we get to that level."