Yen, Swiss franc rise as investors search for havens

The dollar struggled for direction in Friday’s trade, with traders erring on the side of cautious ahead of the closely watched U.S. inflation report that could weaken or strengthen the case for another Federal Reserve rate hike this year.

The ICE Dollar Index DXY, +0.05% , which measures the greenback against a basket of six rival currencies, was marginally higher at 93.460. For the week, the benchmark was set for a 0.1% drop.

The euro EURUSD, -0.1359% bought $1.1757, down from $1.1774 late Thursday in New York, while the pound GBPUSD, -0.1849% bought $1.2970, compared with $1.2978 on Thursday.

The subtle moves came as investors wait for the U.S. consumer-price index for July to be released at 8:30 a.m. Eastern Time. Surprising low inflation recently has been one of the major concerns for the Fed and a key reason the central bank hasn’t raised interest rates more aggressively. That means a bearish reading today “could be another major blow to dollar’s outlook,” according to Konstantinos Anthis, researcher at ADS Securities.

“Unfortunately for dollar bulls today’s inflation report is more of a risk event for the buck rather than an opportunity to pick up pace,” he said.

“A softer reading would mean fresh trouble as it would remind investors that inflation remains well below Fed’s target and suggest that a December rate hike might not be that likely after all,” he said.

Aside from U.S. data, the tensions between U.S. and North Korea remained a key focal point. U.S. President Donald Trump raised the stakes on Thursday, saying his earlier threat to unleash “fire and fury” on North Korea “maybe wasn’t tough enough.”

Additionally, China weighed in on the standoff, warning in an editorial in state-run Global Times that Beijing will intervene if the U.S. strikes first against North Korea.

That helped pushed up currencies perceived as safer assets, like the Japanese yen and Swiss franc. The dollar USDJPY, -0.09% fetched ¥108.94, down from ¥109.20 on Thursday. The Swiss franc CHFUSD, +0.0520% bought $1.0412, up from $1.0389.

Other Asian currencies, however, stumbled on fears of a conflict in the region. Against the South Korean won USDKRW, +0.13% the dollar rose to 1146.41 won, up from 1144.16 won on Thursday.