NEW YORK/LONDON: The dollar was little changed to slightly higher against a basket of its peers on Monday, recouping some of its earlier losses as traders held on to large positions in the greenback ahead of the Federal Reserve’s Jackson Hole, Wyoming, symposium starting on Friday.
The dollar index, which measures the currency against six other majors and has had five straight weeks of gains, last rose 0.068% to 103.440, still shy of Friday’s two-month high of 103.68.
Karl Schamotta, chief market strategist at Corpay in Toronto, said the widening in expected growth differentials is currently the big trade in global market as yields in the UK and Europe play catch-up with the United States.
“The dollar does look like it is still the cleanest dirty shirt on the global economic landscape,” Schamotta said. “Traders are holding relatively hefty positions in the dollar going into Jackson Hole just in case Chair Powell does come out with a more hawkish perspective on recent data.”
The euro was up 0.1% at $1.0889, while sterling was last trading at $1.2736, down 0.03%. The Japanese yen, which is on intervention watch, weakened 0.65% versus the greenback at 146.35 per dollar.
Although the yen has fallen to levels around which authorities stepped in last year, analysts at JP Morgan sees the threshold for currency market intervention at around 150 per dollar this time around.
Also on watch for intervention is the Chinese yuan, which rose 0.2% in offshore markets versus the greenback at $7.29 per dollar.
The currency fell to the weaker side of 7.3 per dollar earlier before rebounding after Reuters reported that state-owned Chinese banks were seen actively mopping up offshore yuan liquidity, a move that raised the cost of shorting the currency. China earlier cut its one-year benchmark lending rate by 10 basis points (bps) and left its five-year rate unchanged, against economists’ expectations for larger 15-bps cuts to both.
In the United States, Fed Chair Jerome Powell is set to speak on Friday, and his comments may set the direction for US Treasury yields, which have driven the rise in the dollar in recent weeks.
Ten-year yields soared to a 15-year high on Monday and were last up 8.7 basis points at 4.337%.
The theme this year for the annual gathering in Wyoming is “structural shifts in the global economy”.
“While China’s stimulus was underwhelming, hopes remain high for more action should the economy continue to slow,” said Joe Manimbo, senior market analyst at Convera in Washington.