Title: Dollar Holds Steady as Investors Await Fed’s Jackson Hole Symposium
Subtitle: U.S. Dollar gains strength following five consecutive weeks of gains
Date: August 21, 2023
The U.S. dollar remained firm during Asia trade on Monday, maintaining its strength after five consecutive weeks of gains. Investors are eagerly awaiting the Federal Reserve’s Jackson Hole symposium for guidance on the future direction of interest rates.
Last week, the U.S. dollar saw significant gains against major currencies, including a 0.7% increase against the euro. It also inched higher against the yen and surged by over 1% against the Antipodean currencies. These gains were mainly driven by rising U.S. Treasury yields, which indicated the expectation of higher interest rates in the future.
In Asia, the Australian dollar and the New Zealand dollar were trading close to their nine-month lows. China’s decision to cut its one-year benchmark lending rate by 10 basis points instead of the expected 15 basis points disappointed the markets, raising concerns about the slowdown of the Chinese economy.
As a result of this rate cut, the Chinese yuan slid beyond 7.3 per dollar, although the central bank maintained a firm trading range. Both the Australian and New Zealand dollars are considered vulnerable due to their close ties with China and the impact of the rate outlook on the strength of the U.S. dollar.
According to strategists at the Commonwealth Bank of Australia, the Australian dollar is expected to continue underperforming this week, with a growing risk of it dipping below $0.60 before the end of the year. They believe that a significant Chinese stimulus package focused on commodity-intensive infrastructure spending would be needed to reverse this downward trend.
Meanwhile, the Japanese yen is also under scrutiny as it approaches intervention watch levels. The currency was steady at 145.37 yen per dollar in Asia. In addition, the euro held steady at $1.0880, while sterling hovered around $1.2739. The Swiss franc, on the other hand, was slightly higher after hitting a six-week low last week.
Apart from the situation in China, market attention is focused on the upcoming Jackson Hole symposium, where Federal Reserve Chair Jerome Powell is set to speak on Friday. The symposium’s theme this year is “structural shifts in the global economy.” Investors are eagerly waiting for any indications on the future direction of U.S. yields.
Finally, Bitcoin continues its recovery after reaching a two-month low last week. The cryptocurrency is currently valued at $26,054.
Overall, market participants are closely monitoring central bank actions and economic signals from major economies as they seek clarity on the direction of global interest rates and the impact on different currencies.
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