US Dollar Strengthens Ahead of Fed Chair Powell’s Speech Today

A renewed bout of strength in the US dollar has taken it back above the 93 level against other major currencies as Fed officials adopt a hawkish tone ahead of today’s Jackson Hole symposium, raising expectations for Chairman Powell to announce a possible timeline to begin tapering asset purchases. At the time of writing, the US dollar index DXY is trading at around 93.03.

During the previous session, Dallas Fed President Robert Kaplan drove up investor interest in the greenback when he shared his expectations for the US central bank to start raising interest rates in 2022. His hawkish statements came only a week after he shared concerns about the delta variant’s spread hurting economic recovery.

Expectations for the Fed to turn hawkish sooner were also boosted by comments from Kaplan’s counterparts from Kansas City and St. Louis who reassured markets that the delta variant did not seem to have much of an economic impact. St. Louis Fed President James Bullard also called for the Fed to begin tapering its monthly bond purchase program worth $120 billion soon.

However, these comments have not had driven up confidence among investors too drastically just yet. This is because many still anticipate that Powell could continue to maintain his dovish tones in today’s speech, adopting a more cautious approach towards monetary stimulus.

In case the Fed chair does share some insights on when the tapering process could begin, the US dollar could receive some more strength and climb higher against other leading currencies. On the other hand, if he delays this announcement, we could see investors moving away from the reserve currency as they have been doing for most of this week.