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U.S. Dollar Ends Strong Week On High Note To Restart Debate Over Peak

A combination of thin summer markets and jittery traders has helped set the dollar up for a strong finish.

U.S. Dollar Ends Strong Week On High Note To Restart Debate Over Peak

A combination of thin summer markets and jittery traders has helped set the dollar up for a strong finish to what has been a solid week of gains.

Bloomberg’s gauge of the greenback rose for a third day, climbing as much as 0.3%, and the US currency strengthened against all major peers. Some traders pointed to Indonesian President Joko Widodo’s comments that Xi Jinping and Vladimir Putin would attend a Group of 20 summit later this year as a catalyst for haven dollar buying.

Investors are also readying for next week’s much-anticipated Federal Reserve Jackson Hole symposium, where Chair Jerome Powell is expected to lay out a hawkish view on the dangers of inflation. And a slew of woeful economic data from China and Europe has also driven haven bids, reviving talk that the dollar hasn’t yet peaked.

“The market is seemingly getting a bit nervous Putin may be meeting with new and old friends,” said Rodrigo Catril, strategist at National Australia Bank. “When in doubt dollar is the place to be.”

U.S. Dollar Ends Strong Week On High Note To Restart Debate Over Peak

The dollar pared recent declines this week amid a recovery in Treasury yields as Fed officials pushed back against bets on rate cuts next year. Minutes of their latest policy meeting suggested they are planning to keep rates steady at a “restrictive level” until inflation was clearly on a downward path again.

The US currency’s rebound comes amid a debate on whether or not it peaked in mid-July after signs emerged that aggressive policy tightening may finally be cooling the quickest US inflation in four decades. Hedge funds turned bearish on the greenback for the first time in a year last week as some wagered its best days may be over.

The Bloomberg Dollar Spot Index is now just under 2 percentage points below its all-time high reached on July 14. The gauge dates from the end of 2004.

On Friday, risk-sensitive currencies fared worse with the Australian dollar and its New Zealand counterpart selling off. The Korean won led declines in Asia, falling to its weakest in more than a decade. The yuan also slumped, edging closer to a two-year low.

Still, the poor sentiment failed to have much of an impact on other traditional havens. The yen retreated as its own recent rebound threatened to unravel and Treasuries edged lower.

(Updates throughout.)

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