He dollar fell to a seven-month low and the Japanese Yen hit a more than one-week high as traders awaited comments from the Chairman of the Federal Reserve (Fed), Jerome Powellthis week, which are expected to indicate that the US central bank will begin cutting interest rates in September.
A key point from Powell’s speech in Jackson Hole Friday will be whether it signals the Fed is likely to cut rates by 25 or 50 basis points. The odds of a larger cut have diminished since data last week showed higher-than-expected housing inflation for July and also a strong retail sales report for the month.
Another big issue will be whether Powell signals that rate cuts are likely at every future meeting, but markets may be overestimating how far and quickly the Fed is likely to act. “I think we’re still at the point of making the case for cutting in September,” said Eugene Epstein, head of North American structuring at Moneycorp in New Jersey.
Minutes from the Fed’s July meeting, due on Wednesday, and Powell’s speech on Friday are likely to be the main drivers of the currency in a week that will also see inflation data released. Canada and Japan and readings of the US purchasing managers’ index, the Eurozone and the United Kingdom.
He dollar index fell 0.56% to 101.89 and reached 101.85, its lowest level since January 2. The euro rose 0.47% to $1.108 and reached $1.1085, its highest level since Dec. 28.
He dollar weakened 0.62% to 146.66 Japanese Yen after earlier hitting 145.20 yen, its lowest level since August 7.
Analysts attributed the dollar’s broad weakness to the possibility of a further narrowing of the gap between interest rates in the United States and Japan. The governor of the Bank of Japan (BoJ), Kazuo Uedadiscussing before Parliament the central bank’s decision last month to raise rates.
In turn, the Australian dollar was driven by optimism that China will offer a fresh stimulus in the form of shopping vouchers aimed at helping to bring growth back to this year’s target of around 5%. The Australian currency rose 0.95% to close at $0.6729, touching $0.6732, its highest level since July 18.
Source: Ambito
