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Dollar moves mixed ahead of Kevin Warsh at Jackson Hole

The dollar has been pulled by a risk-on rally that reduced safe-haven demand, while renewed Brent strength is reviving inflation and Treasury yield concerns.

Reported · Written up by our desk · Major Pairs

The US dollar has shown mixed performance as rising oil prices and higher Treasury yields have supported the currency, while an S&P 500 rally led by NVIDIA has boosted risk appetite and reduced demand for the greenback as a safe haven, according to Action Forex. Investors are holding back ahead of Kevin Warsh’s Jackson Hole speech, with market focus on signals about inflation and Treasury dynamics. The outlook is being complicated by the oil market’s shifting sentiment, as euphoria tied to a temporary transit route through the Strait of Hormuz fades amid demands involving Iran, Oman, and US criticism of Oman. Action Forex also links the currency outlook to interest-rate feedback loops between the Fed and the debt market. It notes that, under Kevin Warsh’s theory, a rise in Treasury yields could lower the odds of monetary tightening, while a fall in yields could increase the likelihood of tighter Fed policy, with further complications if Treasury issuance decisions influence long-end yields. The outlet points to a broader interplay between the Fed and the Treasury, citing a Fed balance sheet reduction through selling Treasuries to banks and a Treasury approach that cuts back on long-term issuance, moves that it says can push yields lower. It adds that coordinated currency intervention has eased USDJPY from 40-year highs, but differing interest-rate expectations and the level of oil prices and yields still leave the dollar aiming to move back toward the ¥160 area.

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