Dollar Rallies as Warsh Flags Hawkish Tone

The US dollar rallied against major currencies on August 28 after Federal Reserve chief Kevin Warsh emphasized fighting high inflation as a priority in his speech at the Jackson Hole symposium.

Warsh stated that 'we must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do.' This was seen as more hawkish than expected by investors.

The Fed's target for inflation is 2 percent, but it currently stands at nearly double that figure, 3.7 percent.

As a result of Warsh's speech, short-term US Treasury bonds saw yields spike in anticipation of a higher Fed rate. Futures markets also raised the odds of a rate hike in September, and the dollar jumped against the euro and other major currencies.