Dollar Bounces Near Eight-Day High Amid Fed Policy Uncertainty

The US dollar strengthened on Thursday, nearing an eight-day high as investors awaited signals from the Federal Reserve's policy path at the Jackson Hole symposium. The data showed that inflation remained stickier than expected in July, which helped expectations that interest rates could stay restrictive through the end of this year.

The euro was flat against the dollar at $1.1652, while the British pound dipped 0.08% to $1.3587. The yen was largely steady, with traders also digesting a speech by the Bank of Japan's deputy governor.

According to Elias Haddad, global head of markets strategy at Brown Brothers Harriman, 'The big support for the dollar here is that the US economy continues to outpace that of other major economies.' He added that he expects US rates to stay unchanged for the rest of the year, contrary to market pricing.

However, analysts said that no rate hikes this year from the central bank could limit the dollar's gains. 'I don't expect the dollar to make new highs, because of the risk of a more dovish Fed repricing and the lack of US fiscal credibility are two big headwinds,' one analyst noted.

The Treasury's attempt last week to limit a rise in long-term borrowing costs through increased sales revived dollar debasement chatter on soaring debt concerns and government intervention in markets. The spotlight will now be on the Jackson Hole symposium starting later in the day, where Chairman Kevin Warsh's remarks on Friday will be closely monitored for any hints on both the Treasury's latest shift, and monetary policy.