The dollar index rose 0.20% on Wednesday, recovering from early losses tied to a dovish US CPI report and reduced expectations for a Fed rate hike. The rebound came as Treasury note prices closed only mildly higher, with Wednesday's 10-year T-note auction producing the highest yield since the 2007 financial crisis. July's US CPI report was exactly in line with market expectations, with year-on-year CPI easing to 3.4% from June's 3.5% and core CPI easing to 2.5% from 2.6%. Markets now discount a 40% probability of a 25 basis point rate hike at the next FOMC meeting on September 15-16, down from 51% on Tuesday. Safe-haven demand for the dollar also remained supported by high risk of renewed Middle East flare-ups, with little sign of progress in US-Iran talks over the Strait of Hormuz.
