Dollar Retreats as Fed Hawk Tones Down Rate Hike Expectations
The US dollar index pulled back slightly on Wednesday, dropping 0.2% to 101.22, after New York Fed President John Williams said there's 'no need for urgency' to raise borrowing costs further.
This minor correction puts the greenback on track for a 2% advance against the yen in September and its strongest overall monthly performance since June, driven by surging Treasury yields and geopolitical tension in energy markets.
Market expectations for an October Fed rate hike eased following Williams' comments, with money markets recalibrating the probability of an increase down to around 50%, from above 70% earlier in the week. This has tempered upside momentum for the dollar ahead of the August US Personal Consumption Expenditures (PCE) price index release.
The Japanese yen outperformed its G10 peers, rising 0.3% to, as traders treaded cautiously around official intervention risks following fresh warnings from Japan's top currency diplomat Atsushi Mimura.