The dollar held to a narrow range on Wednesday, with investors reluctant to take large positions before the release of U.S. inflation data and the start of the Federal Reserve's annual Jackson Hole symposium later in the week.
The dollar index, which tracks the greenback against six major currencies, edged up 0.1% to 98.988, remaining near the three-month low it touched after the Treasury Department moved last week to cap long-term bond yields. The index has traded in a band of roughly 98.9 to 99.1 over recent sessions.
Analysts at Standard Chartered wrote in a research note that the greenback "is likely to suffer near-term on the back of an incongruous intervention strategy." They added that "the desire to get U.S. rates lower may present another headwind to the dollar and encourage more appetite for carry trades."
The currency market's primary focus is now on the July personal consumption expenditures price index, due later Wednesday, and Fed Chair Kevin Warsh's keynote address at Jackson Hole on Friday. Traders are looking for any signal on whether the central bank could raise rates at its September meeting. Fed funds futures currently price in about a 40% chance of a quarter-point hike next month, down from roughly 55% a month ago, according to CME FedWatch.
DBS analysts described Warsh's speech as "the most important event this week," noting he "faces a difficult balancing act: defending the Fed's independence and price-stability mandate while providing greater clarity on the Fed's reaction function without abandoning his preference for less forward guidance."
The Australian dollar climbed 0.3% to $0.7183, its strongest in three months, after the Reserve Bank of Australia's preferred inflation gauge, the trimmed-mean CPI, rose 3.6% year-on-year in the second quarter, faster than economists had forecast.
"With underlying inflation showing no signs of slowing, there's still a risk that the RBA will deliver another rate hike over the coming months," analysts at Capital Economics wrote in a research note.
Against the yen, the dollar slipped 0.2% to 158.98, staying well below levels that triggered joint intervention by U.S. and Japanese authorities in the past month. Currency strategist Stephen Jen called the coordinated action a "watershed moment."
The Bank of Japan said Governor Kazuo Ueda will skip this week's Jackson Hole gathering because of a scheduling conflict, with board member Naoki Tamura attending in his place. A majority of economists in a recent poll said the BOJ will likely raise rates again in September, moving faster than previously expected.
The euro was little changed at $1.1661. Three sources told Reuters that European Central Bank policymakers are prepared to raise interest rates at their September meeting but have little appetite to signal further tightening beyond that. Sterling slipped 0.1% to $1.3631.
The Canadian dollar weakened for a third straight session, with the greenback up 0.1% at C$1.3861. Ottawa announced retaliatory tariffs on about $20 billion worth of U.S. annual imports and rolled out aid for businesses and workers after trade negotiations with Washington collapsed. President Donald Trump said the U.S. would raise tariffs to 50% on all Canadian cars, trucks, automotive parts and steel starting January 1, 2027.
Goldman Sachs analysts said the Canadian dollar's underperformance was "relatively muted" and "likely signaling some continued expectation for an ultimate resolution." Economists at UBS trimmed their 2026 growth forecast for Canada to 0.9% from 1% due to the tariff escalation.
Oil prices extended their decline, with Brent crude futures down 1.8% at $86.99 after Iran said it had restarted talks with Oman over managing the Strait of Hormuz. Washington's expanded sanctions against Tehran, unveiled Monday, were seen as lacking detail and did not mention major trade partners such as China. Treasury Secretary Scott Bessent warned countries to cut business ties with Iran or risk being shut out of the dollar-based financial system.
The New Zealand dollar fell 0.4% to $0.5954 ahead of a Reserve Bank of New Zealand rate decision next Wednesday, with the market overwhelmingly expecting a 25-basis-point hike to 2.75%, according to LSEG data.
Cryptocurrencies continued their sharp rally as investors revived dollar-debasement trades. Bitcoin rose 1% to $79,005.72, after briefly topping $80,000 on Tuesday, while ether gained 1.1% to $2,462.85. The two largest digital assets are up 25% and 32% respectively this month.
Gold slipped 0.4% to $4,639.44, trimming its monthly advance to 14.7%.
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