The U.S. dollar held firm near a one-week high against major peers on Friday, as investors stood on the sidelines ahead of Federal Reserve Chairman Kevin Warsh's speech at the Jackson Hole symposium.
Warsh's debut speech in Wyoming is slated for 1400 GMT. Inflation has remained persistently above 2%, leading traders to price in at least one 25 basis point interest rate hike this year and supporting the dollar in recent days.
Major currencies and commodities move
The euro EUR= and sterling GBP=D3 were a touch softer against the greenback, last at $1.1646 and $1.3589, respectively. Both currencies were set for their first weekly drop in a month.
The yen JPY= also weakened a touch to 159.645 per dollar, as investors assessed inflation data out of Tokyo.
"Even though Warsh has repeatedly emphasised in recent weeks that the Fed's 2% target is non-negotiable, he has never explicitly mentioned the PCE deflator in this context," Volkmar Baur, an FX & commodity analyst at Commerzbank said in a note, referencing the personal consumption expenditures measure of prices.
"It could therefore be that the Fed is at least considering applying a different measure of inflation."
"Such a hint would likely nip rate hike expectations in the bud and be interpreted by the market as a dovish signal. The U.S. dollar could come under pressure as a result."
The dollar index =USD, which measures the currency against six major peers, was at 99.18, just below Thursday's one-week high of 99.26.
In Tokyo, annual core inflation accelerated in August, a day after Bank of Japan Deputy Governor Ryozo Himino stressed the need for timely interest rate hikes.
Traders see a 68% chance that the BOJ could hike interest rates by 25 bps next month, LSEG-compiled data showed.
The Australian dollar AUD=D3 was set for its ninth-straight week of gains as rate hike bets built up. The currency has gained 0.4% this week and was last at a three-month high of $0.7197.
The Canadian dollar CAD=D3 was flat at $0.721 and was heading for its biggest weekly drop of 0.6% since mid-June after trade tensions with the U.S. escalated.
Bitcoin BTC= dipped to $79,715, but was on track for a 26.7% rise in August - its biggest monthly gain since late 2024. Some analysts have said worries about U.S. debt levels have boosted cryptocurrencies this month.
Markets await policy clues and Fed stance
Many in markets would welcome any comments on monetary policy and the U.S. Treasury's effort to bring down long-term borrowing costs during a period of volatility in bond markets.
However, given Warsh's reticence to offer guidance, analysts said an update on the five task forces on the workings of the Fed he established at the start of his term is more likely.
On the sidelines of the Jackson Hole conference, some Fed officials on Thursday reiterated their concerns about inflation and signalled they were open to rate hikes, following data that showed persistent price pressures.
However, analysts see a greater likelihood of the Fed leaving interest rates on hold through the end of this year, which could weigh on the dollar.
TLT•
