The Dollar edged higher but remained largely range-bound in Asian trading on Wednesday, as investors awaited US inflation data that could shape expectations ahead of the Jackson Hole symposium later this week.
Against a basket of six major currencies, the Dollar rose 0.1% to 98.988, close to the upper end of the narrow range it has traded within over the past week. The currency has hovered near a three-month low following last week’s moves by the Treasury Department to limit US long-term bond yields.
Meanwhile, the Australian Dollar gained 0.3% to US$0.7183, its highest level in three months, after data showed the Reserve Bank of Australia’s preferred measure of underlying inflation rose more than expected.
The trimmed-mean CPI increased 3.6% year-on-year, exceeding forecasts and adding to concerns about persistent price pressures.
Traders are now turning their attention to the release of US personal consumption expenditures (PCE) data for July later on Wednesday, with the figures expected to provide fresh clues on the Federal Reserve’s policy outlook.
Markets will then focus on Fed Chair Kevin Warsh’s keynote address at the Jackson Hole symposium on Friday.
His speech is expected to be the week’s key event. Warsh faces a delicate balancing act between defending the Fed’s independence and commitment to price stability, while offering markets more insight into its policy reaction function without giving up his preference for limited forward guidance, Reuters reports.
Oil prices extended their recent decline on Wednesday, with Brent crude futures falling 1.8% to $86.99 a barrel. The drop came after Iran said it had resumed talks with neighbouring Oman on managing the Strait of Hormuz, while diplomatic efforts between Washington and Tehran remained deadlocked.
The US Dollar also strengthened 0.1% against the Canadian Dollar to C$1.3861, marking a third consecutive day of gains against the loonie. The Canadian currency came under pressure after Ottawa announced retaliatory tariffs on around $20 billion of annual US imports on Tuesday, along with support measures for businesses and workers, following the collapse of trade talks with Washington last week.
Elsewhere, the New Zealand Dollar slipped 0.4% to $0.5954, meeting resistance after its recent rally ahead of next Wednesday’s Reserve Bank of New Zealand interest rate decision. Markets are overwhelmingly pricing in a 25-basis-point rate hike to 2.75%, according to LSEG data.
Furthermore, the Euro eased 0.1% to $1.1661 after three sources told Reuters that European Central Bank policymakers are prepared to raise interest rates at their September meeting, but are unlikely to signal further tightening beyond that.
The British pound also slipped 0.1% to $1.3631.