Dollar Steadies Ahead of Jackson Hole Address

The U.S. dollar held near a one-week high on Friday as traders waited for Federal Reserve Chairman Kevin Warsh to speak at the Jackson Hole symposium in Wyoming. Warsh was scheduled to take the stage at 1400 GMT, and markets were largely inactive in the hours before the address.

The gathering, hosted annually by the Kansas City Fed before an audience of central bankers, academics and market participants from around the world, has a history of carrying policy weight: Ben Bernanke's 2010 address foreshadowed a second round of quantitative easing, and Jerome Powell used the 2020 symposium to unveil the Fed's average inflation targeting framework.

The dollar index stood at 99.18, just below Thursday's high of 99.26. The index tracks the dollar against a weighted basket of six major currencies, with the euro its largest component.

Rate-Hike Bets Underpin the Dollar

Inflation has remained above the Fed's 2% target, prompting traders to price in at least one 25 basis point rate hike this year — expectations that have supported the dollar in recent sessions.

Warsh, however, is known for offering little forward guidance. Analysts said he was more likely to provide an update on the five internal Fed task forces he set up at the start of his term than to signal a rate move.

Commerzbank analyst Volkmar Baur raised the possibility that the Fed could be considering a different measure of inflation beyond the PCE deflator, the gauge the Fed formally uses for its 2% objective. Any hint of such a shift, he said, would likely be seen as a dovish signal and could put pressure on the dollar.

Other Fed Officials Sound Hawkish

On the sidelines of the Jackson Hole conference on Thursday, several Fed officials repeated their concerns about inflation and signaled that they were open to rate hikes. Even so, many analysts still expect the Fed to hold rates steady through the end of the year.

ING's Chris Turner said he does not think the Fed will hike in September — or at all — and put his year-end dollar/yen forecast at around 158.

Euro and Sterling Head for Weekly Losses

The euro fell slightly to $1.1646 and sterling dropped to $1.3589, with both currencies on track for their first weekly decline in a month.

The yen weakened to 159.645 per dollar. Tokyo inflation data showed annual core prices accelerated in August, a day after the Bank of Japan's deputy governor called for timely rate hikes. Markets now see a 68% chance that the Bank of Japan raises rates by 25 basis points next month.

Bitcoin Eyes Best Month Since Late 2024

Bitcoin dipped to $79,715 on Friday but remained on track for a 26.7% gain in August — its largest monthly rise since late 2024. Some analysts pointed to concerns about U.S. debt levels as a driver of crypto gains this month.

Elsewhere in currency markets, the Australian dollar was headed for a ninth straight week of gains, sitting at a three-month high of $0.7197. The Canadian dollar was flat but set for its biggest weekly drop since mid-June after trade tensions with the U.S. rose.

Markets remained focused on Warsh's speech as the main event of the day, with rate expectations and currency moves likely to shift once he speaks. Beyond the address, the next scheduled checkpoints for traders are the Fed's September policy meeting and the Bank of Japan's decision next month.

Source: CoinCentral