USD is fluctuating amid expectations to keep interest rates high for a longer period

The dollar retreated slightly from a 12-week level on Monday, August 28, as investors assessed the path of US monetary policy after US Federal Reserve Chairman Jerome Powell left the door open to the possibility of further interest rate hikes.

In a highly anticipated speech at the annual financial policy symposium in Jackson Hole, Powell promised to tread carefully in future central bank meetings, citing progress in easing price pressures and risks related to the sudden strength of the US economy.

“We will tread carefully when deciding whether to further tighten monetary policy or instead keep interest rates steady and wait for more data,” Powell said on Friday.

He noted that “the Fed’s mission is to bring inflation down to our target of 2%, and we will do it.”

The dollar index, which measures the performance of the US currency against six competing currencies, fell 0.106% to 104.05, but remained close to the highest level in 12 weeks at 104.44, which it touched on Friday. The index rose more than 2% in August, heading to end a streak
Losses lasted two months.

The CME Group’s Videowatch tool showed that markets expect an 80% chance of the US Federal Reserve keeping interest rates unchanged next month, but the probability of a 25 basis point hike in November is now expected at 48%, compared to 33% before. week.

A series of strong US economic data helped ease fears of a recession, but with inflation still above the US Fed’s target, some investors are concerned that US central banks will keep interest rates at higher levels for longer.

The yen fell 0.03% to 146.46 per dollar, near its lowest level in more than nine months at 146.64 touched on Friday, while traders continue to monitor any signs of the Japanese government’s intervention in the currency market.

The euro and the British pound rose from the two-month lows they touched on Friday. The euro rose 0.08% to 1.0809 dollars, while the sterling recorded in the latest transactions 1.26 dollars, up 0.18% during the day.

The Australian dollar rose 0.42% to $0.643, and the New Zealand dollar rose 0.20% to $0.592 in the wake of China’s halving of stamp duty on stock trading, which helped increase risk appetite.