US Dollar Index strengthens above 98.00 ahead of FOMC Minutes

• US Dollar Index gains ground to around 98.30 in Wednesday's Asian session. 
• Traders reduced Fed rate cut bets in September after hotter-than-expected US July PPI data. 
• The FOMC Minutes will be in the spotlight later on Wednesday. 

The US Dollar Index (DXY), an index of the value of the US Dollar (USD) measured against a basket of six world currencies, trades on a stronger note around 98.30 during the Asian trading hours on Wednesday. Diminishing odds for a more aggressive policy easing by the Federal Reserve (Fed) after a jump in US July wholesale prices provide some support to the DXY. 

Traders ramped up expectations on a rate reduction at the Fed's September meeting after a weak July employment report, and as last month's Consumer Price Index (CPI) inflation data showed limited upward pressure from tariffs. Nonetheless, a hotter-than-expected July Producer Price Index (PPI) reading has reduced some rate-cut bets, lifting the US Dollar against its rivals.  

Fed fund futures traders are now pricing in an 86% chance of a September Fed rate cut, after last week briefly fully pricing in a move, according to the CME FedWatch tool. Traders are pricing in 54 basis points (bps) of reductions by year-end.

Data released by the Commerce Department on Tuesday showed that US Housing Starts rose by 5.2% to an annual rate of 1.428 million in July, compared to a 4.6% increase in the previous month. Meanwhile, US Building Permits declined 2.8% to an annual rate of 1.354 million in July after edging down by 0.1% to a downwardly revised rate of 1.393 million in June.

Minutes of the Federal Open Market Committee (FOMC) from its July 29-30 meeting will be published on Wednesday. Traders brace for the Fed's Jackson Hole Economic Policy Symposium later on Friday for further clues on US interest rate policy. Traders are tuned into whether Fed Chair Jerome Powell will push back against market pricing of a rate cut in September. Any dovish remarks from Fed policymakers could undermine the DXY in the near term.