Dollar strengthens ahead of Jackson Hole, kiwi drops on dovish RBNZ
FILE PHOTO: U.S. dollar banknotes are seen in this illustration taken March 19, 2025. REUTERS/Dado Ruvic/Illustration/File Photo
TOKYO :The U.S. dollar gained for a third straight session on Wednesday against the euro and sterling as traders awaited the Federal Reserve's annual Jackson Hole symposium this week for clues on the monetary policy path.
The New Zealand dollar tumbled after the central bank reduced its cash rate by a quarter point to 3.0 per cent as expected, but said its board had also considered a half-point cut.
The kiwi slumped as much as 1.3 per cent to $0.5820, its weakest since April 14, with policymakers lowering their projected floor for the cash rate to 2.55 per cent, from 2.85 per cent forecast in May.
"The market did not expect the bank to send a strong dovish signal that it intends to deliver further cuts," Prashant Newnaha, a rates strategist at TD Securities, wrote in a client note. He has increased his forecast for additional easing, now projecting a cash rate of 2.5 per cent by November.
The U.S. dollar index, which measures the currency against six major counterparts, rose as high as 98.441 for the first time since August 12 on Wednesday, after gaining a combined 0.4 per cent over the first two days of the week.
The euro eased 0.1 per cent to $1.1638, and sterling slipped 0.1 per cent to $1.3480.
The greenback advanced 0.1 per cent to 0.8080 Swiss franc, though it edged down 0.1 per cent to 147.46 yen.
Friday's speech by Fed Chair Jerome Powell is the market's main focus, as traders watch for any pushback against market pricing of a rate reduction next month.
Traders now place odds of 84 per cent on such a cut and expect about 54 basis points of reductions by year-end.
"Given the relatively high bar for Powell to meet, there's a bit of risk being baked into the markets that he leans to the hawkish side and the proverbial rug gets pulled from beneath investors," said Kyle Rodda, an analyst at Capital.com.
Traders, who ramped up bets for a Fed cut on September 17 after a surprisingly weak payrolls report at the start of this month, were further encouraged after consumer price data showed limited upward pressure from tariffs.
However, a hotter-than-expected producer price reading last week complicated the policy picture.
Powell has said he is reluctant to cut rates because of expected tariff-driven price pressures this summer.
Later on Wednesday, the Fed will issue the minutes of its meeting on July 29 and 30, when it held rates steady, although they may offer limited insight as the meeting came before the weak jobs numbers.
In cryptocurrencies, bitcoin hovered at around $113,612 after earlier dipping to the lowest since August 3 at $112,578.38, pressured by a strengthening dollar.
Ether was little changed at around $4,170.
