Investing.com - The dollar traded higher against its rivals Thursday as data showing inflation continue to meet the Federal Reserve's target and consumer spending remained firm, strengthening the central bank's case to continue with gradual rate hikes.
The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.29% to 94.73.
The Federal Reserve's preferred inflation measure -- the personal consumption expenditures (PCE) price index excluding food and energy -- rose 2% in the 12 months through July.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.4% last month, the Commerce Department said on Thursday.
Some analysts, however, said it was still too early for the Federal Reserve to declare victory on the inflation front as core inflation, which excludes more volatile food and energy prices, reached 2% for just the third time this year in July, and annual comparisons are expected to get tougher.
"The year-over-year comparisons will soon get harder. Last year, price pressures were soft through the summer before gaining steam in September, in part from hurricane-recovery-related spending," Economists at Morgan Stanley said.
In the Federal Reserve's most recent meeting in July, policymakers said they expected inflation to come under pressure from falling oil prices, but remained adamant that inflation would continue to trend near the central bank's 2% objective.
Still, expectations for a Fed rate hike in September appear to be fully baked in, according to Investing.com's Fed Rate Monitor tool.
The dollar's rise was also supported by a slump the euro and Canadian dollar.
EUR/USD fell 0.42% to $1.1658, while USD/CAD rose 0.53% to $1.2981. The Canadian dollar retreated from 2-1/2 month peaks against the greenback, which had followed optimism over a U.S.-Canada agreement on the North American Free Trade Agreement.
The pound, meanwhile, struggled to hold gains against the dollar following its sharp rise yesterday amid upbeat comments on a Brexit deal from EU chief negotiator Michel Barnier.
GBP/USD fell 0.13% to $1.3009 after rising to session high of $1.3043 on growing expectations that the U.K will secure a trade deal with the EU before it departs from the European Union.
USD/JPY fell 0.42% to Y111.22 as risk-off sentiment triggered demand for safe-haven yen, adding to downside momentum in the pair.