Dollar Falls as Powell Hints at Rate Cuts

The U.S. dollar experienced a decline on Friday, influenced by Federal Reserve Chair Jerome Powell's speech at the Jackson Hole summit and ongoing speculation regarding the Bank of Japan's (BOJ) interest rate policies. The dollar index, which gauges the currency against six major counterparts, fell by 0.44% to 101.05, nearing its 2024 low of 100.92 reached earlier in the week. This marks the dollar's fifth consecutive week of losses, reflecting investor concerns about the economic outlook. In contrast, the Japanese yen saw a modest increase of 0.3%, reaching 145.82 per dollar. BOJ Governor Kazuo Ueda reiterated his commitment to raising interest rates if inflation trends toward the central bank's 2% target. Analysts, including Vasu Menon from OCBC, noted that Ueda's comments indicate a willingness to consider further rate hikes, despite potential market volatility. He emphasized that as long as the dollar-yen exchange rate remains stable, it should not significantly disrupt global markets. Ueda's remarks came during a parliamentary session where he addressed the BOJ's decision to raise rates in July, acknowledging ongoing market jitters that could impact inflation forecasts. The initial rate hike led to a significant unwinding of yen-funded carry trades, contributing to a global market selloff in early August, although most markets have since rebounded. Meanwhile, the euro rose by 0.1% to $1.1123, close to a 13-month high, while the British pound increased by 0.2% to $1.3125, just below its recent peak. Positive consumer confidence data from the UK, reflecting improved sentiment regarding personal finances, further bolstered the pound and indicated a strengthening economy.