Dollar Holds Near One-Week High as Markets Await Warsh’s Jackson Hole Remarks

By COMFORT OGBONNA

The U.S. dollar held near a one-week high against major currencies on Friday as investors largely stayed on the sidelines ahead of Federal Reserve Chair Kevin Warsh’s closely watched speech at the Jackson Hole economic symposium.

Markets are looking for signals about Warsh’s approach to interest rates, inflation and the recent volatility in U.S. government bond markets. His remarks could influence expectations for the Federal Reserve’s next policy decisions and the direction of the dollar in the coming weeks.

The euro and British pound remained subdued near one-week lows against the dollar. The euro was last trading at $1.1645, while sterling stood at $1.3588.

Despite their recent weakness, both currencies remained on course for a second consecutive monthly gain.

The Japanese yen also weakened slightly to 159.55 per dollar. The currency has given back some of the gains it made following intervention-related support but was still headed for a monthly increase of about 1.3%.

The dollar index, which measures the U.S. currency against six major peers, edged up to 99.18.

The index has gained about 0.3% this week but remains on track for a second straight monthly decline, with a fall of about 0.6% expected for August.

The dollar’s monthly performance has been affected in part by concerns surrounding the U.S. Treasury’s plans to increase buybacks of longer-dated government bonds. The move has fueled debate over whether efforts to reduce borrowing costs could eventually undermine confidence in the dollar.

Investors are now focused on Warsh’s scheduled speech in Jackson Hole at 1400 GMT.

The remarks represent an important opportunity for markets to assess how the new Fed chair views monetary policy, inflation and the sharp movements that have recently affected the U.S. bond market.

However, expectations for a major policy signal have been tempered by Warsh’s opposition to providing explicit forward guidance on interest rates.

Several other Federal Reserve officials reiterated their concerns about inflation on Thursday and indicated that they remained open to raising interest rates if price pressures failed to ease sufficiently.

Recent economic data has strengthened those concerns. Inflation has remained elevated, prompting investors to increase their expectations for another rate increase later this year.

Markets were pricing in roughly a 35% probability of a rate hike at the Federal Reserve’s September meeting, with the probability rising to about 75% by December.

That outlook has helped keep Treasury yields elevated.

The benchmark 10-year Treasury yield was last around 4.68%, reflecting continued uncertainty over the future path of monetary policy and the possibility that interest rates could remain high for longer.

Analysts at Citi said investors were in a wait-and-see mode ahead of Warsh’s speech and were particularly interested in whether his views would align with those of Treasury Secretary Scott Bessent.

Any indication of greater policy coordination could reinforce expectations for reduced volatility in longer-term bond yields and potentially weigh on the dollar, the analysts said.

The dollar’s reaction will depend heavily on how investors interpret Warsh’s comments rather than simply whether he sounds hawkish or dovish.

A stronger emphasis on persistent inflation and the need for higher rates could support the dollar by increasing expectations for tighter monetary policy. A softer tone, particularly if Warsh highlights economic risks or signals greater tolerance for lower rates, could put additional pressure on the currency.

Other major currencies were also responding to shifting interest-rate expectations.

The Australian dollar rose as much as 0.1% to a three-month high of $0.7205 as investors increased bets that the Reserve Bank of Australia could raise interest rates again.

The New Zealand dollar also gained 0.1% to $0.5955.

The Canadian dollar was little changed at $1.3844 per U.S. dollar and was heading for a second consecutive monthly decline as trade tensions between Canada and the United States continued to weigh on the currency.

In cryptocurrency markets, bitcoin briefly climbed above $81,000 before giving up some of its gains. The cryptocurrency remained on track for an increase of nearly 30% in August, which would represent its strongest monthly performance since late 2024.

Oil markets were also being closely watched by currency traders as Brent crude hovered around $90 a barrel.

Oil prices have been pressured by signs that crude shipments through the Strait of Hormuz are continuing despite heightened tensions involving Iran. At the same time, uncertainty surrounding diplomatic efforts between Washington and Tehran has prevented markets from fully dismissing the possibility of further disruptions.

Reports that U.S. President Donald Trump had rejected the idea of restoring the terms of a memorandum of understanding previously reached with Iran added to uncertainty surrounding the region.

For currency markets, the combination of interest-rate expectations, bond yields, inflation and geopolitical developments has created an unusually sensitive backdrop.

Investors are now waiting for Warsh to provide his assessment of the economy and monetary policy. Even without offering direct guidance on future rate decisions, subtle changes in his language could influence expectations across global financial markets.

With the dollar already on course for another monthly decline, traders will be watching closely to determine whether the new Fed chair’s message can reverse that trend or reinforce expectations that the U.S. currency will remain under pressure.