The US Dollar regained some ground on Thursday after last week’s losses, as investors looked to the Jackson Hole symposium for clues on the Federal Reserve’s future policy direction following data showing inflation was proving more persistent than expected.
Figures released on Wednesday showed US inflation increased more than anticipated in July, reinforcing expectations that interest rates could remain restrictive through the end of the year.
Separate data also confirmed that the US economy expanded 1.5% in the second quarter.
The Euro was little changed at $1.1652, while the Pound slipped 0.08% to $1.3587. The Yen was also broadly steady at 159.35 per Dollar as traders assessed comments from the Bank of Japan’s deputy governor.
The US currency was trading near a one-week high against its three major counterparts. The Dollar index, which tracks the greenback against a basket of six currencies, stood at 99.158, up around 0.3% for the week after falling 0.8% last week.
Markets are pricing in steady interest rates at the Fed’s September meeting, but see a roughly 70% probability of at least a 25-basis-point hike by December, as ongoing Middle East tensions keep oil prices elevated.
Currency and bond markets remained unsettled following the Treasury’s move last week to curb the rise in long-term borrowing costs by stepping up its purchases of longer-dated bonds, Reuters reports.
The move has reignited concerns over Dollar debasement amid mounting government debt and increased intervention in financial markets, with Bitcoin gaining 25% this month to $78,853.88.
Attention now turns to the Jackson Hole symposium, which begins later on Thursday. Markets will closely watch Chairman Kevin Warsh’s remarks on Friday for clues about both the Treasury’s latest policy shift and the Federal Reserve’s monetary policy outlook. Weekly jobless claims, due on Thursday, could also provide further direction for investors.
Moreover, traders were also watching for signals on the direction of interest rates from other major central banks.
Earlier on Thursday, Bank of Japan Deputy Governor Ryozo Himino said timely rate increases could help prevent a surge in inflation that might require more aggressive tightening later. However, he stopped short of indicating that a rate hike was imminent.
The Yen has surrendered some of its gains following the US-Japan intervention in currency markets last month.