Dollar mixed before Jackson
Hole speeches
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[August 25, 2017]
By Patrick Graham
LONDON (Reuters) - The dollar gained
against the yen but inched down against the euro on Friday, as traders
cleared the decks for speeches by Federal Reserve chief Janet Yellen and
her euro zone counterpart Mario Draghi at a central bank meeting in
Jackson Hole, Wyoming.
A debate in the U.S. Congress over raising the government's debt ceiling
has begun to loom over the U.S. currency, with lawmakers expected to
have just two weeks to agree a deal when they return in September.
But with trade thinned by the last weeks of the European holiday season,
and a bank holiday weekend in the world's main currency trading hub
London, expectations of more signs from Yellen on plans to reduce the
Fed's balance sheet had steadied the greenback overnight.
It was on course to end the week 0.4 percent stronger against the yen,
having slipped to as low as 108.60 yen on tensions stemming from the
Korean Peninsula.
"Given the vibes that we have been getting from the Fed I think it is
becoming clear that they are intent on pursuing this balance sheet
reduction next month," said Alvin Tan, a strategist with Societe
Generale in London.
"The market is effectively expecting an announcement in September so (if
Yellen promises one) it will not be a surprise. (But) the kneejerk could
help push U.S. bond yields higher and obviously help the dollar."
Expectations that Draghi and the European Central Bank will push forward
with their own tightening of policy this year, however, have driven the
single currency close to 14 percent higher this year and many banks
predict more is to come.
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Dollar banknotes are seen in this picture illustration taken June
13, 2017. REUTERS/Dado Ruvic/Illustration
By 1057, the euro had gained around 0.17 percent to $1.1784 <EUR=EBS>.
The dollar was up 0.1 percent on the day at 109.69 yen <JPY=>.
Price data from Japan highlighted what could be a major topic of
discussion at the central bankers' gathering: why are inflationary
pressures remaining so stubbornly weak despite a seemingly synchronized
global economic recovery?
Japan's core consumer prices inched up for a seventh straight month in
July from a year earlier, but the gain was a tepid 0.5 percent and
driven largely by higher fuel bills. The yen showed little reaction.
The ECB's job has been made harder by a stronger euro and traders are
still wary of any comment on the currency's strength from Draghi.
The dollar index against a basket of six major currencies was also up
0.1 percent at 93.382 <.DXY> after nudging up 0.15 percent overnight on
the back of a rise in U.S. Treasury yields.
"If anything, Draghi may deliver a rather dovish message that still
leaves the door open to tapering at the end of the year while carefully
managing the euro lower," said Oanda analyst Craig Erlam.
(Writing by Patrick Graham; Editing by Jeremy Gaunt and David Holmes)
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