NEW YORK, Oct 10 (Reuters) - The U.S. dollar edged lower against the yen on Thursday after data showed signs of labor market weakness and a higher-than-expected rise in U.S. inflation in September even though prices were on a downward trend, allowing the Federal Reserve to keep cutting interest rates.
Labor Department data on Thursday showed that the consumer price index increased 0.2% in September. In the 12 months through September the CPI climbed 2.4%, which was the smallest year-on-year rise since February 2021.
Economists polled by Reuters had forecast the CPI edging up 0.1% and rising 2.3% year-on-year.
Other data from the Labor Department also showed that the number of Americans seeking unemployment benefits surged last week, driven partly by Hurricane Helene and furloughs at Boeing (BA.N), opens new tab.
Initial claims for state unemployment benefits increased to 258,000 last week, compared with a Reuters analyst estimate of 230,000 claims.
The greenback was down 0.39% at 148.71 yen after rising to as high as 149.58 yen for the first time since Aug. 2 . The euro dropped to its lowest since Aug. 9 against the dollar and was down 0.17% on the day at $1.092.
The dollar index , which measures the currency against six key rivals including the yen and euro, was up slightly by 0.1% to 102.97 in choppy trading after hitting its highest since August 15.
Annual inflation in the US eases back, but by not as much as expected.
"The claims number dominated the story and that's driven bond yields lower because it's reminded the market that the Fed actually has some concerns about the employment story," said John Velis, FX and macro strategist at BNY in Boston.
Traders are betting a nearly 90% chance on the Fed cutting rates by 25 basis points at its next policy decision on Nov. 7, and a 9% probability of no change, the CME Group's FedWatch Tool showed. The yield on benchmark U.S. 10-year notes rose 3.3 basis points to 4.1%.
"We had such a good September job print that this kind of swings back in the other direction and has taken out some of that restrictive Fed pricing, or let me say it's put in some more expectations of a rate cut for the November 7th meeting," Velis added.
The U.S. economy gained 254,000 jobs in September and the unemployment rate fell to 4.1%, Labor Department data had showed on Friday.
The risk-sensitive Australian dollar was up 0.05% to $0.6722. It earlier rose more than 0.3% on the back of an equity rally in top trading partner China as the East Asian nation's central bank launched a swap programme aimed at supporting the stock market.
China's finance ministry is due to hold a highly anticipated news conference on fiscal policy on Saturday. The dollar <CNH=EBS> was flat to 7.093 versus the offshore Chinese yuan.
In cryptocurrencies, bitcoin gained 0.28% to $60,541.29. Ethereum rose 1% to $2,377.29.
Reporting by Chibuike Oguh in New York; additional reporting by Harry Robertson and Kevin Buckland; Editing by Chizu Nomiyama
