Dollar Hits 5-Week High Before Jackson Hole On Hawkish Fed

After another Federal Reserve member signaled aggressive monetary tightening ahead of this week's Jackson Hole symposium, the U.S. dollar index touched a five-week high on Monday.

After Russia announced a three-day Nord Stream 1 gas supply stop at the end of the month, the euro fell to a five-week low.

After the central bank cut key lending rates, China's yuan fell to its lowest in nearly two years, adding to a series of monetary easing measures to support an economy struggling with COVID-19 and a property crisis.

For the first time since July 15, the U.S. dollar index rose to 108.26, up 0.074%.

Last week, it rose 2.33%, its largest weekly rise since April 2020, as Fed members stressed the need to lower decades-high inflation.

On Friday, Richmond Fed President Thomas Barkin said central bankers wanted speedier, front-loaded rate increases.

"Fed speakers have been reinforcing the notion that more rate hikes are coming given the fight against inflation has not yet been won," scaring markets before Jackson Hole on Aug.

25-27, amid increased anticipation for Fed Chair Jerome Powell to highlight that tightening is "still a long way from the end," National Australia Bank senior FX strategist Rodrigo Catril wrote in a client note.

Money markets predict a 47.5% possibility of another supersized 75 basis-point rate hike on Sept. 21 and a 52.5% chance of a half-point hike.

With recession chances rising, Reuters economists want a 50 basis-point increase.

Tokyo 10-year U.S. Treasury rates surged above 3% on Monday for the first time since July 21.

The dollar reached 137.40 yen, its highest level since July 27, against Japan's currency, which is sensitive to U.S. yields.

After the People's Bank of China dropped one- and five-year loan prime rates as expected, the dollar reached 6.8308 yuan in onshore trading for the first time since September 2020.

It lowered borrowing charges unexpectedly last week.

The dollar reached 6.8520 against the offshore yuan, its highest since September 2020.

The euro fell to $1.0026 for the first time since July 15 before trading down 0.13% at $1.0027.

Sterling lost 0.23% to $1.1805, hitting Friday's five-week low of $1.17925.

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