US dollar inches lower as markets weigh Fed rate outlook; yen hovers near 160
Hawkish remarks from Federal Reserve chair Kevin Warsh fuelled bets on a September rate hike
On Monday (August 31), the US dollar exhibited a slight decline, though it retained a near two-week peak. This shift occurred as traders increased speculation of a Federal Reserve rate hike in September, following hawkish comments from chair Kevin Warsh, coupled with escalating Gulf tensions. Warsh emphasized that the central bank would face challenges if they fail to demonstrate progress in reducing inflation to the 2% target, suggesting possible further tightening measures.
This fueled expectations of a potential September rate hike, elevating the likelihood to 60%. Consequently, yields on 2-year US Treasury notes edged close to a one-month high. Warsh's remarks were strategically aimed at bolstering expectations of a rate hike, shifting the debate toward hawkish views and reinforcing his commitment to combating inflation.
Investors are now concentrating on forthcoming US data, notably the nonfarm payrolls report on Friday and consumer inflation figures next week, both of which could impact expectations preceding the Fed's September meeting. The euro climbed 0.16% to $1.1602, while the British pound edged up to $1.3543, both currencies continuing a streak of consecutive monthly gains.
The dollar index, gauging the US dollar's value against six major counterparts, slipped 0.14% to 99.51 following a Friday high of 99.73, indicating a second consecutive monthly loss. Despite this, the index remained on track for a second consecutive monthly decline, as earlier US Treasury bond-buyback plans reignited debasement strategies.
Meanwhile, tensions in the Gulf intensified, pushing oil prices up, with Brent crude futures surging 3.4% to $91.06 a barrel. Additionally, the dollar's strengthened position added pressure on the Japanese yen, which regained around 0.24% to 159.65 per dollar, following a dip beyond 160 per dollar on Friday. This resurgence prompted concerns about potential official intervention by Japan and the US to stabilize the currency.
US Treasury Secretary Scott Bessent noted that recent yen movements had been contained and anticipated Bank of Japan Governor Kazuo Ueda to adhere to appropriate monetary policy. China's yuan strengthened to 6.72 per dollar after reporting an uptick in factory activity in August, despite the economy still being in contraction.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
