The dollar was range-bound in illiquid Asian trade on Thursday as major currencies continued to tread water ahead of the global central bankers’ gathering in Jackson Hole, Wyoming, at which Federal Reserve Chair Janet Yellen may offer new clues on U.S. monetary policy.
Fed officials including Vice Chairman Stanley Fischer and New York Fed President William Dudley have recently prompted some investors to raise their bets that the Fed is poised to hike rates again sooner rather than later, and some predict Yellen to echo their signals.
Futures markets on Wednesday were indicating an 18 percent chance the U.S. central bank would hike rates at its policy meeting next month, and a roughly 50 percent chance of a rate increase in December, according to CME Group’s FedWatch tool.
“A portion of the market is expecting hawkish overtones after Dudley,” said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong. “So to that extent, we’re expecting some would be disappointed if she ended up being more dovish than some people may have expected.”
The dollar was flat at 100.44 yen JPY=, holding above the 100-yen level under which it has dipped in recent sessions.
The currencies have traded in a narrow 99.55-102.83 band this month, and could move back toward the upper end of that range depending on Yellen’s remarks, analysts say.
“The dollar has finally caught a bid,” wrote Kathy Lien, managing director of FX strategy at BK Asset Management, who said in a note that the U.S. unit was likely poised for a stronger recovery that could take it to 102 against the yen.
“It probably won’t happen on the back of Yellen’s comments but it could happen over the next few weeks as long as 99.00 hold,” said Lien.
Also weighing on the yen were growing expectations that the Bank of Japan will decide to take additional stimulus steps at its next meeting in September, when it will review its policies against a backdrop of growing doubt that the BOJ’s target of 2 percent inflation target is within reach.
Japan’s government kept its assessment of the economy unchanged in August but offered a slightly more downbeat view on consumer inflation than last month, as prices slid on weak household spending and the strong yen pushed down import costs.
The Cabinet Office said in its monthly report for August that consumer prices were flat – a gloomier view than last month when price rises were slowing.
A Reuters poll on Thursday showed that a majority of economists expects the Bank of Japan will ease policy further next month, though about 40 percent of analysts surveyed said they expected the central bank to keep monetary policy unchanged.
The euro inched up 0.1 percent to $1.1275 EUR=, pushing down the dollar index, which tracks the greenback against a basket of six major rivals, to 94.715 .DXY, 0.1 percent lower on the day.