NEW YORK/LONDON: The dollar edged up on Wednesday as oil prices slowed after a big two-day advance, US Treasury yields moved higher and investors awaited clues on the tapering of economic support by the Federal Reserve at this week’s Jackson Hole symposium.
Risk appetite in global markets improved after the US Food and Drug Administration fully approved the COVID-19 vaccine developed by Pfizer and BioNTech in a move that could accelerate US inoculations.
Dr. Anthony Fauci, the top US infectious disease expert, said on Tuesday that the United States could get COVID-19 under control by early next year.
But the focus has turned to the Jackson Hole symposium and what Fed Chair Jerome Powell may say about tapering the US central bank’s bond-buying program when he speaks on Friday.
The markets expect Powell to sound dovish and echo concerns last week by Robert Kaplan, the Dallas Fed president, who said he might reconsider the start to tapering due to the Delta variant of the coronavirus, said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.
“The risk is that Powell does not really say anything too different but by virtue of not backing up Kaplan, comes across as more hawkish,” Osborne said.
The dollar picked up support as Treasury yields nudged higher, he said. The benchmark 10-year Treasury note rose 4.4 basis points to yield 1.33%.
The dollar index, which measures the US currency against a basket of six major trading currencies, rose 0.028% to 92.941.
The euro gained 0.03% at $1.1757, while the yen rose 0.36% at $110.0200.
The greenback had rallied until the start of this week, with the dollar index hitting a 9-1/2-month high of 93.734 on Friday, on fears over the Delta variant’s economic impact and as the Fed signaled its tapering of monetary stimulus was likely this year.
Vasileios Gkionakis, global head of FX strategy at Lombard Odier Group, said there’s been skittishness over growth and sector rotations, which has boosted the dollar because of its safe-haven status.
“In the short term, we’re still going to be trading in ranges, with upside bias,” Gkionakis said.
Dollar underperformance after Jackson Hole could be a buying opportunity ahead of the release of US data next week, including the non-farm payrolls report for August, said Valentin Marinov, head of G10 FX research at Credit Agricole.
“Potential positive surprises from the NFP in particular could put QE (quantitative easing) taper back among the main FX market drivers and support the USD,” Marinov said.
Sterling traded 0.03% lower at $1.3723 after rising to as high as $1.37475 on Tuesday, its strongest since Nov. 19.
Australia’s dollar dropped 0.09% to $0.7265 after touching a one-week high of $0.7271 in the previous session.
The dollar gained 0.3% to 1.2624 against the Canadian dollar as commodity prices, and especially crude oil, have moderated.
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