Dollar Recovers as Focus Shifts to Fed Remarks at Jackson Hole

The US dollar showed signs of recovery on Thursday as investors awaited signals from the Federal Reserve's policy path at the Jackson Hole symposium. Data released earlier in the week showed inflation rose more than expected in July, which aided expectations that interest rates could stay restrictive through the end of this year.

According to Elias Haddad, global head of markets strategy at Brown Brothers Harriman, 'the big support for the dollar here is that the U.S. economy continues to outpace that of other major economies.' The dollar index, which measures the greenback's move against a basket of six currencies, was at 99.158, up about 0.3% this week.

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 U.S. fiscal credibility are two big headwinds,' Haddad added.

Traders were also digesting a speech by BOJ Deputy Governor Ryozo Himino, who said timely rate hikes would help avoid an inflation spike that could force abrupt tightening later. However, he stopped short of signalling an imminent rate hike.