15.08.201306:28:57UTC+00Dollar declines before CPI as caution from Fed's Bullard damps bid

The dollar slouched versus most of its 16 major counterparts after a U.S. central bank official cautioned versus too much optimism over the economy.

The Bloomberg U.S. Dollar Index retreated after Federal Reserve Bank of St. Louis President James Bullard announced yesterday policy makers should be careful in changing course based solely on their economic forecasts. Economists predict a report today will show gains in U.S. consumer prices slowed last month. The yen advanced as Japanese stocks backslide after a government official said Prime Minister Shinzo Abe hasn’t given instructions to bring down the nation’s corporate tax.

Slowing Inflation

The Labor Department may say today inflation in the world’s biggest economy, as measured by consumer prices, probably climbed 0.2 percent in July after a 0.5 percent gain a month earlier, a separate Bloomberg News poll showed.

The dollar has slumped 2.2 percent in the past month, the worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro has weakened 0.2 percent, while the yen has gained 0.3 percent.

Japan’s Chief Cabinet Secretary Yoshihide Suga said today Abe hasn’t given instructions to lower the corporate tax. The Nikkei newspaper reported on Aug. 13 that the prime minister has called for a study to reduce the levy.

“The market seems nervous on prospects for Japan’s tax policy,” said Tsutomu Soma, a manager of Rakuten Securities Inc.’s fixed-income business unit department in Tokyo. “Stocks declined on comments that Japan will not cut corporate tax, boosting yen buying.”

Japan’s Nikkei 225 Stock Average diminished 1.7 percent. The MSCI Asia Pacific Index of shares decreased 0.4 percent, set to close lower for the first time in more than a week.

The pound bolstered for a second day before a report that may show U.K. retail sales including automotive fuel skyrocketed 0.7 percent in July, from a 0.2 percent advance in the previous month, according to economists surveyed by Bloomberg.

Sterling inched up 0.2 percent to $1.5526 after a 0.3 percent surge yesterday.