Dollar Slips as Markets Await Federal Reserve's Jackson Hole Update

The dollar fell against the yen as traders prepared for Federal Reserve Chair Jerome Powell's speech at the Jackson Hole summit. The Bank of Japan remains committed to raising rates if inflation targets are met. Powell’s address may influence market expectations regarding U.S. interest rate cuts.

The dollar dipped against the yen on Friday as traders braced for Federal Reserve Chair Jerome Powell's speech at the Jackson Hole summit. The prospect of the Bank of Japan continuing to raise interest rates also played a role in the dollar's decline.

Japan's yen increased by 0.2% to 146.03 per dollar, having reached 145.29 earlier in the session. This rise followed BOJ Governor Kazuo Ueda's reaffirmation to raise rates if inflation sustainably hits the 2% target. "His comments suggest market turbulence won't deter the BOJ from considering more rate hikes," said Vasu Menon of OCBC.

The BOJ's recent rate hike sparked a massive unwind of yen-funded carry trades, triggering a global selloff in early August. Markets, however, have since recovered. Traders are now keenly awaiting Powell's 10 a.m. EDT speech at the Kansas City Fed's Jackson Hole research conference to gauge the future trajectory of U.S. borrowing costs. Current market sentiment indicates a 74% chance of a rate cut by the Fed in September.

(With inputs from agencies.)