The greenback held steady in Asia on Friday on expectations Federal Reserve Chairman Jerome Powell will, in a crucial speech, adhere to his message that the U.S. central bank has not entered a protracted monetary easing cycle.
The dollar hit another 11-year high versus the Chinese yuan on Friday.
The New Zealand greenback plunged from a three-and-a-half-year low after the Pacific nation’s central bank chief stated he was “pleased” with where rates of interest were, hosing down expectations of more fast rate cuts to follow this month’s dynamic easing.
Powell delivers the extremely-awaited speech later Friday at a meeting of central bankers in Jackson Hole. Doubts about further easing emerged after two Fed officers said they saw no purpose to cut rates of interest again without new indicators of economic weakness.
International central banks’ shift has in recent months pushed currency markets to much more accommodative policy settings as economic demand slows and trade wars intensify.
Expectations that the Fed will pare rates at its following meeting in September are nonetheless very high, based on the price of interest futures; however, the currency market is prone to react if the tone of Powell’s comments doesn’t match these dovish expectations.
In addition to the Jackson Hole meeting over the weekend, a G7 summit in France from Saturday could also knock currencies. The European Union hopes to ease tensions with the US to avoid disciplinary tariffs on EU autos.
In onshore trading in China, the yuan dropped to 7.0961 per greenback, its weakest since March 2008. In offshore trade, the yuan weakened to 7.0987.