The US Dollar Index is struggling in Asian trade as investors ponder the outcome of looming inflation reports. The greenback has been able to hold onto last week’s gains which came as a result of robust labor data. That particular data, and hopes that July’s CPI will be upbeat, have kept hopes alive for a Fed rate hike later in the year. The Index held above the 15-month trough struck early last week and remains just off the peak achieved after Friday’s NFP data.

As reported at 10:49 am (JST) in Tokyo, the US Dollar Index was trading at 93.324 .DXY, down 0.12%; the Index had hit a peak of 93.774 .DXY. The USD/JPY was trading lower at 110.601, down 0.10%. The AUD/USD is up 0.28% at $0.7936 while the NZD/USD was up 0.07% at $0.7367.

Inflation Key to Fed’s Future Policy

Investors will be looking off to the Fed’s September policy meeting to gauge the possibility of a reduction in its quantitative easing plan, either with a rate hike or by a reduction in bond purchases. Thursday, and then Friday’s release of producer prices and CPI, respectively, could offer some clues as to the Fed’s thinking. The Fed needs to balance the strengthening US labor market with rising inflation. If the improved labor situation doesn’t significantly impact inflation, analysts say that the Fed won’t need to raise interest rates to slow growth.