Dollar falls to 7-month low, yen rises as investors await Powell speech

The dollar fell to a seven-month low on Monday, while the yen hit its highest in more than a week, as investors awaited a speech by Federal Reserve Chairman Jerome Powell in Jackson Hole.

Powell is likely to signal a 25- or 50-basis-point rate cut in his speech on Friday. The odds of a deeper cut have fallen since data last week showed stronger-than-expected housing inflation in July, as well as a strong retail sales report for the month.

The focus may also be on whether Powell will signal a rate cut at each future meeting. But markets may be overestimating how far and how fast the central bank is likely to move.

“I think we’re still at the point where a cut is justified in September,” Eugene Epstein, head of North American structuring at Moneycorp in New Jersey, told CNBC.

The minutes of the Fed’s July policy meeting are also due on Wednesday for fresh clues on the path of interest rates.

The dollar index fell 0.34% to 102.11, having earlier hit 102.00, its lowest since Jan. 5.

The euro rose 0.19% to $1.1049, hitting $1.10545, its highest since Dec. 29.

The dollar fell 0.75% to 146.48 yen after earlier hitting 145.20 yen, its lowest since Aug. 7.

The yen rose on optimism that the gap in interest rates between the United States and Japan will continue to narrow.

Bank of Japan Governor Kazuo Ueda is expected to discuss the central bank’s decision last month to raise interest rates when he speaks to parliament on Friday.

The Australian dollar was last up 0.56% at $0.6703, hitting $0.6708, its highest since July 19. Among cryptocurrencies, Bitcoin fell 1.87% to $58,178.