The US dollar continued to trade cautiously ahead of the Fed chair's speech at Jackson Hole, moving within a range near a one-week high. The yen traded around ¥159.50 as markets awaited indications of a Bank of Japan rate hike.
On the morning of 28 August, the US dollar continued to trade cautiously ahead of the meeting of the world's major central bank governors in Jackson Hole, remaining in a narrow range near a one-week high. Market participants sought clues on monetary policy from Fed Chair Kevin Warsh's speech.
The USD Index, a measure of the dollar's strength against six major currencies, was trading around 99.18, approaching the one-week high of 99.24 recorded yesterday. The dollar index is expected to rise 0.3% this week, although concerns about dollar weakness have also emerged following the Treasury Secretary's announcement of increased purchases of long-term bonds.
The Bank of Japan has indicated that it may raise interest rates in September, while the yen was trading around ¥159.50 per US dollar. BOJ Deputy Governor Hino Ryozo (氷野良三) said that rate hikes should continue at an appropriate time, while pointing to the connection between yen depreciation and inflation.
Market moves next week are expected to depend on guidance from the Federal Reserve. The CME's FedWatch tool is reportedly pricing in a 35% probability of a rate hike in September and 75% in December. In addition, the yen could come under renewed pressure depending on the Bank of Japan's policy assessment, including at its September meeting.