Dollar reverses slump as market plumbs murky Fed direction

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Dollar weakens on US service sector slowdown

NEW YORK, Aug 20 (APP/AFP): The dollar reversed its slump and headed higher in forex trade Friday as markets plumbed the murky direction of the Federal Reserve’s interest rate plans.

The dollar pulled up to 100.20 yen and $1.3080 against the pound, and pushed to $1.1324 against the euro.

There were still widespread doubts that the Fed could raise rates in its September meeting despite two central bank officials pointedly reminding of the possibility over the past week.

A week before US and foreign central bankers gather for the Fed’s annual symposium in Jackson Hole, Wyoming, the Fed clearly remains unsettled about the disjunction between the strong jobs market and persistently weak inflation.

With the US economy still growing slowly, San Francisco Fed chief John Williams recently suggested the Fed needs to consider increasing its inflation target, now at 2 percent, to help stimulate more spending and investment.

Fed Chair Janet Yellen could address that challenge at the Jackson Hole meeting amid worries that ultra-low interest rates around the world are failing to push up economic growth.

“The selling pressure in the dollar is strong and for sentiment to change, we need Yellen to say that a rate hike is coming and we need another unambiguously strong non-farm payrolls report,” said Kathy Lien of BK Asset Management.

“Even then, there’s zero chance of a rate hike in September or November,” she argued.