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Title: Dollar eases from near two-decade peak as Jackson Hole looms

Aug 25, 2022 12:40AM ET

By: AnalysisWatch

The U.S. dollar retreated from a near two-year high against a basket of major currencies on Thursday, as investors awaited Federal Reserve Chairman Jerome Powell's speech the next day to get new details on the path of monetary policy.

The South Korean won appreciated after the central bank raised its inflation forecast, indicating further policy tightening is imminent.

The US dollar index, which measures the greenback against six currencies, fell 0.19 percent to 108.42 but remained close to its high since September 2002, when it hit 109.29 in mid-July.

Investors had expected the Fed to redouble its commitment to crushing inflation at its annual meeting in Jackson Hole, Wyoming.

Money markets have lowered their expectations that the U.S. central bank could move to a slower pace of rate hikes after a chorus of hawkish Fed comments in recent weeks, and there is now a 58.5 percent chance of another super-sized 75-basis-point rate hike next month versus a 41.5 percent probability of a half-point increase.

The dollar retreated 0.25% to 136.78 yen, from this week's one-month high of 137.705 yen.

The euro rose 0.18% to $0.998565 after plunging to a 20-year low of $0.99005 on Tuesday.

Sterling rose 0.2 percent to $1.1815 after falling to its lowest level since March 2020 on Tuesday at $1.1718.

After hitting a more than one-month low of $0.6856 earlier in the week, the Australian dollar rose 0.59 percent to $0.69475 on Friday.

The New Zealand kiwi fell 0.35 percent to US $0.622, trailing its Antipodean counterparts, hampered by data showing a drop in local retail sales early in the session. It was at a one-month low of $0.6157 on Monday.

The dollar lost 0.27 percent to 1,336.96 after the Bank of Korea raised interest rates by a quarter point as expected but also raised its inflation forecast for this year to 5.2 percent from 4.5 percent, which would be the fastest pace since 1998, and for next year to 3.7 percent from 2.9 percent.

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