The dollar was up 0.5 percent at 100.760 yen JPY= , pulling further away from an 8-week low of 99.550 struck early last week.
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There have been mixed signals this week from Federal Reserve policymakers, which left the market anticipating more direction at next week’s annual meeting of central bankers from around the world in Jackson Hole, Wyoming.
“Market attention will be squarely focused on U.S. Fed Chair Yellen’s speech at Jackson Hole”. On Friday, the Dow shed 0.2 percent, the S&P lost 0.1 percent and the Nasdaq composite was down less than 0.1 percent.
“Fischer’s comments have raised some expectations in the market, particularly after Dudley’s recent comments”, said Ayako Sera, market strategist at Sumitomo Mitsui Trust Bank. Spot gold is expected to drop deeply to $1,320 per ounce, according to Reuters technical analyst Wang Tao.
A recent batch of strong USA employment readings have yielded upbeat views from some Fed policymakers suggesting rates could rise as soon as September, though mixed messages from the bank’s latest meeting have clouded the outlook.
The Fed raised interest rates in December for the first time in nearly a decade, but has since kept them on hold amid signs of faltering growth in the world economy and subdued US inflation.
The dollar rose 0.4% against a basket of six major currencies as investors began to price in a greater likelihood that the US Fed will raise rates this year, while stocks on major markets fell worldwide.
San Francisco Fed President John Williams late Thursday said he would like to see another interest rate rise “sooner rather than later”, which was viewed as suggesting he would potentially favor a move (http://www.marketwatch.com/story/feds-williams-appears-to-back-september-rate-hike-2016-08-18) at the Fed’s next policy meeting in September.
“Given the low market expectations for a September or December Fed rate hike, a repricing at the front end of the rates curve should drive a near-term rebound in the United States dollars”.
“Yellen could provide her current assessment of the outlook for job growth, inflation and economic growth, and indicate whether caution is still appropriate or whether a rate hike might be on the horizon”, economists at HSBC said in a note.
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The yield on the 2-year Treasury note rose 4.5 basis points to 0.75%, while the 30-year T-bond yield rose 3 basis points to 2.29%. “The DXY US dollar index already seemed to be looking ahead for some slightly more upbeat language on the US economy coming out this week as it rallied 0.4 per cent on Friday”, he said. As a result, Dollars sensitive commodities such as gold and silver moved lower.
