US Data Boosts Fed Rate-Hike Bets, Dollar Holds Near Eight-Day High

US, August 27 : The US dollar remained close to an eight-day peak on Thursday after fresh inflation data modestly strengthened expectations that the Federal Reserve could raise interest rates before the end of the year. Investors were also turning their attention to the Jackson Hole central bankers’ symposium, where policymakers are expected to provide further guidance on the direction of monetary policy.

The dollar index, which tracks the greenback against a basket of major currencies including the euro and yen, advanced 0.21% to 99.13. The move placed the index at its strongest level since August 19 as traders assessed the latest economic indicators and awaited comments from policymakers.

Data released by the US Commerce Department showed that the Personal Consumption Expenditures (PCE) price index climbed 3.7% in the 12 months through July. The annual increase was unchanged from June and slightly exceeded the 3.6% forecast by economists surveyed by Reuters.

On a monthly basis, the PCE index increased 0.2%, compared with expectations for a 0.1% rise. The measure had declined 0.1% in June.

The latest figures kept expectations of a Federal Reserve rate increase later this year in play. Investors are now closely watching the Jackson Hole gathering for indications about the central bank’s next steps.

Westpac economist Ryan Wells said the upcoming speech by Fed Chair Kevin Warsh would provide an important test of how policymakers view the inflation and interest rate outlook.

Yen traders await Bank of Japan signal

Attention was also focused on the Bank of Japan, with markets awaiting a speech and press conference from deputy governor Ryozo Himino. His remarks are expected to offer clues about the possibility of another interest-rate increase in September and the potential pace of monetary tightening beyond that meeting.

The dollar was trading at 159.23 yen after surrendering most of the gains recorded following earlier intervention-related moves. It remained below the multi-decade low near 164 reached previously.

Markets were particularly interested in whether Himino would use language similar to comments he made shortly before the January 2025 policy meeting. At that time, he said policymakers would discuss and decide whether to raise interest rates.

Mitsubishi UFJ Bank senior analyst Akihiko Yokoo said comparable wording could be interpreted as a strong indication that a September increase is under consideration.

However, he noted that significant yen buying could remain limited while investors await remarks from both Himino and Warsh.

Money markets were pricing an 87% probability of a Bank of Japan rate increase next month, according to Totan Tanshi data.

Canadian dollar remains under pressure

The Canadian dollar was little changed at C$1.388 per US dollar. The currency remained under scrutiny after US President Donald Trump renewed criticism of Canada following the breakdown of recent trade discussions between the two countries.

Trump said Wednesday that it was time to make Canada understand that it could not continue with its current approach, adding another layer of uncertainty for currency markets.

Elsewhere, the euro traded at $1.1655, while the British pound remained broadly stable at $1.3592.

The Australian dollar gained 0.18% to $0.7181, while the New Zealand dollar advanced 0.1% to $0.5948 against the greenback.

Cryptocurrencies edge higher

Digital assets also moved higher during the session. Bitcoin rose 0.55% to $78,874.60, while Ether gained 1.07% to $2,498.35.

Currency markets are now expected to remain sensitive to central bank commentary, particularly as investors weigh inflation developments against the possibility of further monetary tightening in the United States and Japan.