August 23, 2019 / 1:34 PM / 24 days ago

FOREX-Dollar climbs vs euro, yen on prospect of less dovish Fed

    * Fed's Mester, Kaplan comment on easing cycle
    * September rate cut fully priced in
    * After a brief rally on Thursday, euro on back foot again
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Recasts, updates prices, market activity, adds Fed officials comments, FX table; changes byline, new
dateline; previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, Aug 23 (Reuters) - The dollar rose to a three-week high against the euro and a one-week peak
versus the yen on Friday ahead of a speech from Federal Reserve Chair Jerome Powell, with investors
expecting him to express some reluctance to embark on a long rate-cut cycle after a chorus of Fed
officials voiced a similar sentiment.
    Powell will address the Jackson Hole symposium of central bankers at 1400 GMT on Friday, and traders
are waiting to see how closely he allies himself with the hawks within the Fed.
    Currency markets have in recent months been driven by a shift at global central banks to looser
monetary policy as economic demand slows and trade disputes intensify.
    Expectations that the Fed will cut rates at its next meeting in September have been fully priced into
interest rate futures, but the currency market is likely to react if Powell's comments do not match the
dovish expectations. Money markets price in at least two rate cuts of 25 basis points this year. 
    "We think it is far more likely that Powell remains non-committal and disappoints those looking for
shock and awe policy next month," said Mazen Issa, senior FX strategist, at TD Securities.
    In early morning trading, the euro was down 0.2% at $1.1061, after touching a three-week low of
$1.1052, as the dollar gained and 10-year U.S. Treasury yields rose to a one-week high of 1.663%
. An index that tracks the dollar against six major currencies was up 0.2% at 98.325.
    The dollar was also up 0.1% versus the yen at 106.52, after hitting a one-week high of 106.73.
    Fed officials kept preaching patience when it comes to easing. Cleveland Federal Reserve President
Loretta Mester, who did not support the rate cut last month, told CNBC that if the economy continues to
perform the way it has, the U.S. central bank "should keep things the way they are."
     Dallas Fed President Robert Kaplan said he does not see July's easing as part of a rate-cutting
cycle.
    On Thursday, Kansas City Fed President Esther George and Philadelphia Fed President Patrick Harker
said the Fed currently does not need to further stimulate the economy.
    China's offshore yuan stabilized at 7.0920 after dropping to an 11-day low of 7.1072
overnight as the People’s Bank of China lowered its official yuan midpoint to an 11-year low. The move was
limited even though the set rate was nowhere near the lows traders expected.
    
    ========================================================
    Currency bid prices at 9:16 AM (1316 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1065        $1.1078     -0.12%         -3.52%      +1.1085     +1.1052
 Dollar/Yen       JPY=        106.4500       106.4200    +0.03%         -3.46%      +106.7300   +106.3900
 Euro/Yen         EURJPY=     117.77         117.94      -0.14%         -6.69%      +118.1500   +117.7600
 Dollar/Swiss     CHF=        0.9841         0.9835      +0.06%         +0.28%      +0.9877     +0.9834
 Sterling/Dollar  GBP=        1.2236         1.2250      -0.11%         -4.08%      +1.2265     +1.2196
 Dollar/Canadian  CAD=        1.3315         1.3302      +0.10%         -2.36%      +1.3338     +1.3292
 Australian/Doll  AUD=        0.6743         0.6756      -0.19%         -4.34%      +0.6764     +0.6737
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.0888         1.0896      -0.07%         -3.25%      +1.0928     +1.0890
 Euro/Sterling    EURGBP=     0.9040         0.9041      -0.01%         +0.62%      +0.9080     +0.9038
 NZ               NZD=        0.6376         0.6363      +0.20%         -5.08%      +0.6395     +0.6366
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        9.0049         8.9776      +0.30%         +4.24%      +9.0137     +8.9726
 Euro/Norway      EURNOK=     9.9643         9.9449      +0.20%         +0.59%      +9.9744     +9.9335
 Dollar/Sweden    SEK=        9.6928         9.6767      +0.02%         +8.13%      +9.6983     +9.6700
 Euro/Sweden      EURSEK=     10.7233        10.7215     +0.02%         +4.47%      +10.7280    +10.7049
 
 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Olga Kotaga in London; Editing by David
Gregorio)
  
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