Forex: Dollar slips against yen ahead of Powell's speech

Federated Hermes

23/08/2024 13:09

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      Yen climbs on Ueda's comments 
    

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      Dollar slips ahead of Powell speech
    

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      Euro, pound hover near 13-month high 
    

  
 (Updated at 1144 GMT)
    By Ankur Banerjee and Sruthi Shankar
       Aug 23 (Reuters) - The dollar slipped against the yen on
Friday as traders geared up for Federal Reserve Chair Jerome
Powell's speech at the Jackson Hole summit and weighed the
prospects of the Bank of Japan continuing to raise interest
rates.
    Central bankers will be key in setting the tone for
financial markets over the coming days as a gathering of the
world's most influential monetary policymakers gets under way in
Jackson Hole, Wyoming.
    Japan's yen  JPY=EBS  rose 0.2% to 146.03 per dollar, having
firmed as much as 0.7% to 145.29 earlier in the session, after
BOJ Governor Kazuo Ueda reaffirmed his resolve to raise rates if
inflation stayed on course to sustainably hit the 2% target.
    "His (Ueda) comments suggest that market turbulence won't
deter the BOJ from considering more rate hikes in the future
even if the next move isn't imminent," said Vasu Menon, managing
director of investment strategy at OCBC.
    "As long as the move in the dollar-yen is orderly and
gradual, this should not rattle global markets as much as it did
earlier this month."
    Speaking at parliament, where he was summoned to explain the
BOJ's decision to raise rates in July, Ueda however warned that
markets remained jittery and may affect the central bank's
inflation forecasts.
    The rate hike from the BOJ sparked a massive unwind of carry
trades funded by the yen, and that, coupled with worries of a
U.S. recession, triggered a global selloff in early August.
However, most markets have recovered since then. 
    The dollar index  =USD , which measures the greenback versus
six major peers, was a touch softer at 101.41 and remained close
to the 2024 low of 100.92 it hit on Wednesday. The index is
headed for fifth straight week of losses.
    
    EYES ON JACKSON HOLE
    Powell is due to speak at the Kansas City Fed's annual
Jackson Hole research conference at 10 a.m. EDT (1400 GMT) and
traders will tune in to gauge by how much U.S. borrowing costs
could go lower in the near term.
    Markets are now pricing in a 74% chance of the Fed cutting
rates by 25 basis points (bps) at its September meeting, the CME
FedWatch tool showed, with traders backing away from bets on a
big 50 bps cut. 
    Overall, they see 100 bps of cuts over the next three
meetings, although some analysts think markets are being far too
aggressive and could be disappointed if Powell is cautious. 
    "I wouldn't expect Powell to even allude to a 25 bps cut
versus 50 in terms of what might come in September," said Orla
Garvey, senior fixed income portfolio manager at Federated
Hermes.
    "But if he's perceived as being dovish, that is very
supportive for the broader markets and could lead to more curve
steepening in the U.S. because the data has been losing momentum
for quite a while now and it hasn't been acknowledged by the
market and the Fed."
    The euro  EUR=EBS  was nearly flat at $1.1117, not far from
the 13-month high it touched on Wednesday, while sterling
 GBP=D3  rose 0.3% to $1.31295, a 13-month high. The currency
was just shy of touching levels last seen in April 2022.
    Aiding the move was a survey that showed British consumer
confidence held at an almost three-year high in August, adding
to positive signals in the wider economy.

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World FX rates    https://tmsnrt.rs/2RBWI5E
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 (Reporting by Ankur Banerjee in Singapore and Sruthi Shankar in
Bengaluru; Editing by Christian Schmollinger, Shri Navaratnam,
Kim Coghill, William Maclean)
 ((ankur.banerjee@thomsonreuters.com;; Mobile - +65 8121 3925;
Follow on X (formerly Twitter): @AnkurBanerjee17;))