Dollar grinds higher with Fed in focus in run-up to Jackson Hole

New Straits Times

a day ago

TOKYO: The dollar got off on the front foot on Wednesday following two days of gains as traders awaited the Federal Reserve's Jackson Hole annual symposium later this week for clues on the path for monetary policy.
A speech on Friday by Fed Chair Jerome Powell is the main focus, with the market watching for any push back against market pricing of a rate reduction next month.
Traders currently place 84 per cent odds on a cut next month, and expect around 54 basis points of reductions by year-end.
The dollar index, which measures the currency against six major counterparts, edged up to 98.393 early on Wednesday, the highest since August 12. It had gained about 0.4 per cent in the first two days of this week.
"Given the relatively high bar for Powell to meet, there's a bit of risk being baked into the markets that he leans to the hawkish side and the proverbial rug gets pulled from beneath investors," said Kyle Rodda, an analyst at Capital.com.
In Asian hours, the Reserve Bank of New Zealand sets policy later in the day, with a large majority of economists predicting a quarter-point cut to the cash rate.
The New Zealand dollar drooped close to Tuesday's nearly two-week low, last changing hands at US$0.5895.
"There's little reason for RBNZ to keep rates on hold," said Rodda.
"Inflation is within its target band, and although it is no longer mandated to target the labour market, the unemployment rate is at a post-COVID high."
For the Fed, traders ramped up bets for a cut on September 17 after a surprisingly weak payrolls report at the start of this month, and were further encouraged after consumer price data showed limited upward pressure from tariffs.
However, a hotter-than-expected producer price reading last week complicated the policy picture.
Powell has said he is reluctant to cut rates due to expected tariff-driven price pressures this summer.
The Fed will release minutes from its July 29-30 meeting later on Wednesday, when the central bank held rates steady, although they may offer limited insight as the meeting came before the weak jobs numbers.
The dollar advanced 0.1 per cent to 147.78 yen.
The euro eased 0.1 per cent to US$1.1633, the weakest since August 14.
Sterling slipped 0.1 per cent to US$1.3476, the lowest since August 12.
Australia's dollar edged down to US$0.64485, a level last seen on August 1.