Dollar loiters at two-month peak ahead of Powell speech

Singapore, Aug. 25 (BNA): The U.S. dollar sat at an over two-month peak on Friday, on course for its sixth straight week of gains as markets await a speech from Federal Reserve Chair Jerome Powell to gauge the path of monetary policy.

Investors will parse through Powell’s address on monetary policy at the Jackson Hole Economic Policy Symposium at 10:05 a.m. ET (1405 GMT) to better understand whether the Fed is done with rate hikes and how long it plans to keep rates elevated.

The dollar index, which measures the U.S. currency against six rivals, rose 0.019 per cent to 104.11, the highest since June 7. The index is up 2 per cent in August and set to snap its two-month losing streak, reports Reuters.

Two Federal Reserve officials tentatively welcomed a jump in bond market yields as something that could complement the U.S. central bank’s work to slow the economy and get inflation back to the 2 per cent target, while also noting they see a good chance that no more interest rate increases will be needed.

Data overnight also showed that the number of Americans filing new claims for unemployment benefits fell last week, as labour market conditions remained tight.

A recent run of strong economic data has helped ease worries of an impending recession but with inflation still above the Fed’s target, investors are wary that the U.S. central bank is likely to keep interest rates higher for longer.

Futures are pricing the Fed’s overnight lending rate to stay above 5 per cent through June 2024, with about 100 basis points of rate cuts in the second half. The market in early August was betting on about 130 basis points of cuts next year.

In other currencies, the euro was down 0.17 per cent to $1.0791, while sterling was at $1.2587, down 0.10 per cent on the day. Both currencies were at two-month lows.

The yen weakened 0.18 per cent to 146.10 per dollar as the Asian currency straddled the level at which Japanese authorities intervened last year, keeping traders on their toes looking for signs of similar moves this time.

The Australian dollar eased 0.05 per cent to $0.642, while the New Zealand dollar fell 0.02 per cent to $0.592.

 AHN