The dollar broadly weakened Tuesday as traders awaited a speech by Federal Reserve chief Janet Yellen, which they hope will offer fresh clues about US monetary policy.
The greenback has been see-sawing as divergent views from Fed officials keep markets guessing about the timing of a possible rate hike by the US central bank.
On Monday, the dollar rallied in response to hawkish remarks from the bank’s vice chairman, who said the Fed was close to meeting its inflation and employment targets and outlined an optimistic outlook for the world’s top economy.
His remarks re-ignited speculation that the Fed would hike borrowing costs this year– a plus for the dollar — but the greenback’s upswing was short lived.
In Tokyo, the dollar slipped to 100.22 yen from 100.32 yen Monday in New York.
The euro rose to $1.1330 from $1.1322, while edging down to 113.55 yen from 113.58 yen.
“There are still four months left of the year, so any hawkish comments spark dollar buying only briefly,” Yasuhiro Kaizaki, vice president for global markets at Sumitomo Mitsui Trust Bank, told Bloomberg News.
“Market focus will have to be on Jackson Hole and whether Yellen indicates an intention to raise rates this year. The dollar is looking vulnerable.”
The Fed’s annual central banking symposium kicks off later this week in Jackson Hole, Wyoming, with a speech from Fed Chair Janet Yellen on Friday.
“The markets seem to be already discounting the possibility that Yellen may look to talk up a September rate hike,” Angus Nicholson, a Melbourne-based currency strategist at IG, said in a commentary.
“It seems that it would require a quite noticeably more hawkish Yellen speech than we’ve seen in recent times to stop the US dollar selling off and US bonds continuing to rally on Friday.”
In other trading, the dollar dropped against the South Korean won, Thai baht, Indonesian rupiah, Taiwan’s dollar and Philippine peso.
Traders will be keeping an eye on a speech later Tuesday by Bank of Japan Governor Haruhiko Kuroda.