Dollar Weakens Ahead of Powell's Speech; Yen Gains on Ueda's Hawkish Stance

The dollar softened as traders awaited Federal Reserve Chair Jerome Powell's Jackson Hole speech, while the yen rose following Bank of Japan Governor Kazuo Ueda's reaffirmation of his hawkish stance. Ueda's comments on potential rate hikes boosted the yen, leading to market recovery from early August's turmoil. Markets keenly await Powell's direction on U.S. rate cuts.

The dollar experienced a decline on Friday as traders anticipated Federal Reserve Chair Jerome Powell's upcoming speech at Jackson Hole. Meanwhile, the yen surged after Bank of Japan Governor Kazuo Ueda reiterated his hawkish stance on monetary policy.

Central bankers are set to influence financial markets over the next few days as the world's top monetary policymakers gather in Jackson Hole, Wyoming. The yen rose 0.3% to 145.82 per dollar following Ueda's suggestion to raise rates if inflation meets the 2% target. Ueda warned that market jitters might impact the central bank's inflation forecasts.

Despite the early August selloff triggered by BOJ's rate hike and U.S. recession fears, most markets have since recovered. Traders are now focused on Powell's speech to gauge future U.S. borrowing costs. The CME FedWatch tool indicates a 76% chance of a 25 basis points cut at the September meeting.

(With inputs from agencies.)