The US dollar reversed its upward trend and fell as doubts grew over the likelihood of a September FRB rate hike. The yen is maintaining its recovery trend but remains focused on the ¥160 level.
The US dollar turned lower again on Monday morning amid concerns over the possibility of a September FRB rate hike, and is expected to post its second consecutive monthly decline. The yen recovered but was trading near the psychologically significant level of ¥160 to the dollar.
Following FRB Chair Kevin Warsh's renewed indication at the Jackson Hole meeting of efforts to contain inflation, market expectations that the FRB will raise rates this year increased. However, some said doubts remain over a September hike, as the chair did not provide specific guidance on monetary policy.
According to CME FedWatch, the probability of a 25-bp rate hike at the September meeting was approximately 56.9%, while the probability of at least a 25-bp hike at the December meeting rose to nearly 89%. The dollar's movements are also being affected by factors driving higher oil prices and developments in the Middle East.
After breaking above ¥160 to the dollar, the Japanese yen recovered to ¥159.76 to the dollar. Ahead of the BOJ's policy meeting, expectations supporting a rate hike are strengthening, while the market is also watching the risk of intervention.