The dollar is struggling to compensate for inflationary losses.

HONG KONG (Reuters) – On Thursday, the euro and Japanese yen kept most of their overnight gains. This was because U.S. inflation data came in lower than expected, which made the dollar fall.

The European common currency was trading at $1.0285, which was a loss of 0.14% for the day. This was after a gain of 0.84% on Wednesday, which was the biggest daily percentage gain since the middle of June.

In the same way, one dollar was worth 133.15 yen on Thursday, which was 0.2% more than it was the day before when it had dropped 1.6%.

The dollar fell overnight after U.S. consumer prices stayed the same in July compared to June, when they went up by 1.3%. Due to a sharp drop in the price of gasoline, the July result was lower than expected. This gave the markets new hope that inflation had reached its peak.

If price increases have reached their peak, investors think that the U.S. Federal Reserve won’t have to keep raising interest rates at an eye-poppingly fast rate, which was helping the dollar.

Analysts at Standard Chartered said that the drop in the dollar seemed to be caused by investors’ becoming more comfortable with riskier assets. However, they said that the move against the yen was more of a yield play.

“The unexpected drop in inflation takes away a lot of the market’s fear of a 75bps Fed hike or even moves between meetings,” they wrote in a note.

“We think that many investors didn’t want to buy positions before an important number that could have gone either way. As a result, some of the moves after the CPI probably reflect delayed purchases of positions that are risk-correlated.“

On hearing the news, U.S. stocks and short-term treasuries also went up. This sent the Nasdaq more than 20% above its low point in June and sent the yield on a two-year treasury down to 3.2141%, which is seven basis points less than its previous close. [MKTS/GLOB]

Due to a holiday in Japan, U.S. Treasuries did not trade in Asia.

According to the CME’s Fedwatch tool, the markets think there is a 57.5% chance that the Fed will raise interest rates by 50 basis points at its next meeting. Another 75 basis point increase is still possible.

Fed policymakers also told the public after the data came out that they would keep tightening monetary policy until price pressures were completely gone.

The Australian dollar, which is often used as a proxy for how people feel about taking risks, was at $0.7066, down 0.2% after gaining 1.7% overnight. Sterling was slightly weaker at $1.2192.

Bitcoin, which has also traded in line with risky assets, was up 2.6% to $24,577. If the world’s largest cryptocurrency went above $24,676, it would be the highest price in two months.