Dollar near eight-day high as US data lifts Fed hike bets

NEW YORK, Aug 27 : The dollar was roughly flat on Thursday after a round of economic data, while attention moved towards a speech by Federal Reserve Chair Kevin Warsh at the Jackson Hole symposium.

Warsh is scheduled to speak at the gathering of central bankers on Friday, where investors will watch for clues on how policymakers plan to navigate a landscape in which higher Treasury yields could do some of the tightening work for them.

The dollar has rebounded 0.35 per cent this week after a 0.83 per cent drop in the prior week after U.S. Treasury Secretary Scott Bessent said the Treasury would double the size of quarterly repurchases of longer-dated bonds, sparking concerns that a shift to a more direct strategy to mitigate the rise in borrowing costs could lead to a debasement of the dollar.

The dollar index, which measures the greenback against a basket of currencies, edged up 0.05 per cent to 99.18, with the euro off 0.03 per cent at $1.1646.

CNA Games Guess Word Crack the word, one row at a time Buzzword Create words using the given letters Mini Sudoku Tiny puzzle, mighty brain teaser Mini Crossword Small grid, big challenge Word Search Spot as many words as you can Show More Show Less "I'm surprised the dollar's not a bit stronger actually. The FX market, honestly, is in a bit of a trance," said Erik Bregar, director of FX and precious metals risk management at Silver Gold Bull in Toronto. "Warsh is saying the Fed needs to speak less so that the price signals from the bond market are cleaner, and then Bessent wants to distort those signals by intervening. It makes no sense. So that's why it's even more important for Warsh to set the record straight tomorrow, because if he doesn't, the dollar could actually puke." BNY senior EMEA market strategist Geoff Yu said in a note that the clearest pattern from the last three years of the Jackson Hole meeting is "persistent dollar selling into and through month end, irrespective of the precise policy message," with "the speech determining the magnitude rather than the direction of the seasonal flow." JOBLESS CLAIMS FALL, TRADE GAP WIDENS The greenback showed little reaction to data from the Labor Department that showed weekly initial jobless claims fell for a second straight week to a seasonally adjusted 203,000, below the 208,000 estimate of economists polled by Reuters. A separate report from the Census Bureau showed the U.S. goods trade deficit widened to $118.8 billion in July from $101.4 billion in June, marking the largest goods trade gap since March 2025. Data on Wednesday showed inflation rose more than expected in July, boosting expectations that interest rates could stay restrictive through the end of this year and briefly lifting expectations for a September rate hike from the Fed to over 40 per cent. But expectations for a hike of at least 25 basis points at the central bank's next meeting slipped back to 35.9 per cent on Thursday, according to CME FedWatch. While the focus turns to Warsh's speech, many market participants expect the central bank head to refrain from offering any guidance on monetary policy. As the Jackson Hole conference began, a trio of Fed officials, Kansas City Fed President Jeffrey Schmid, Cleveland Fed President Beth Hammack, and Chicago Fed President Austan Goolsbee, voiced their concerns about the U.S. inflation outlook. Against the Japanese yen, the dollar strengthened 0.09 per cent to 159.45 after Bank of Japan Deputy Governor Ryozo Himino said timely rate hikes would help avoid an inflation spike that could force abrupt tightening later, but stopped short of signalling an imminent rate increase. Sterling softened 0.06 per cent to $1.3585 as investors pared expectations for a Bank of England rate hike this year.

"I'm surprised the dollar's not a bit stronger actually. The FX market, honestly, is in a bit of a trance," said Erik Bregar, director of FX and precious metals risk management at Silver Gold Bull in Toronto.

"Warsh is saying the Fed needs to speak less so that the price signals from the bond market are cleaner, and then Bessent wants to distort those signals by intervening. It makes no sense. So that's why it's even more important for Warsh to set the record straight tomorrow, because if he doesn't, the dollar could actually puke."

BNY senior EMEA market strategist Geoff Yu said in a note that the clearest pattern from the last three years of the Jackson Hole meeting is "persistent dollar selling into and through month end, irrespective of the precise policy message," with "the speech determining the magnitude rather than the direction of the seasonal flow."

The greenback showed little reaction to data from the Labor Department that showed weekly initial jobless claims fell for a second straight week to a seasonally adjusted 203,000, below the 208,000 estimate of economists polled by Reuters.

A separate report from the Census Bureau showed the U.S. goods trade deficit widened to $118.8 billion in July from $101.4 billion in June, marking the largest goods trade gap since March 2025.

Data on Wednesday showed inflation rose more than expected in July, boosting expectations that interest rates could stay restrictive through the end of this year and briefly lifting expectations for a September rate hike from the Fed to over 40 per cent.

But expectations for a hike of at least 25 basis points at the central bank's next meeting slipped back to 35.9 per cent on Thursday, according to CME FedWatch.

While the focus turns to Warsh's speech, many market participants expect the central bank head to refrain from offering any guidance on monetary policy.

As the Jackson Hole conference began, a trio of Fed officials, Kansas City Fed President Jeffrey Schmid, Cleveland Fed President Beth Hammack, and Chicago Fed President Austan Goolsbee, voiced their concerns about the U.S. inflation outlook.

Against the Japanese yen, the dollar strengthened 0.09 per cent to 159.45 after Bank of Japan Deputy Governor Ryozo Himino said timely rate hikes would help avoid an inflation spike that could force abrupt tightening later, but stopped short of signalling an imminent rate increase.

Sterling softened 0.06 per cent to $1.3585 as investors pared expectations for a Bank of England rate hike this year.

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