Dollar Resumes Rally as Bulls Betting on Tightening Await Yellen

A gauge of the dollar rose for a fourth day as traders awaited Federal Reserve Chair Janet Yellen’s speech this week for clues on the path of U.S. interest rates.

The greenback strengthened versus all its developed-market peers as futures traders placed a 28 percent probability of a U.S. interest-rate increase next month and a 54 percent chance by December. A JPMorgan Chase & Co. gauge of global exchange-rate volatility was at a one-month high before Yellen’s speech slated for Friday at the annual monetary policy symposium in Jackson Hole, Wyoming.

“Yellen has to take a clear hawkish stance to justify sustained dollar strength beyond this weekend,” said Nizam Idris, head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd. in Singapore. “While we expect the dollar to rebound in coming days, as recently built short-dollar positions are likely to be squared off ahead of the symposium, the currency could weaken again on even a subtle shift in Yellen’s views.”

A short position is a bet an asset’s price will drop.

The Dollar Spot Index added 0.1 percent as of 6:34 a.m. in London, following a three-day, 0.7 percent gain. The greenback bought 100.39 yen, compared with 100.24 in New York. It advanced 0.1 percent to $1.1294 per euro.
The JPMorgan gauge of price swings rose to 10.22 percent in New York, the highest since July 26.

Hedge funds and other money managers reduced net-bullish wagers on the dollar for the second straight week, according to data from the Commodity Futures Trading Commission. Bets that the dollar will rise outnumbered bearish positions by 125,117 in the week to Aug. 16, down from 144,268 a week earlier.

“There’ll be a greater risk of a bit of profit-taking in U.S. dollar shorts going into Jackson Hole and a bit of a bounce in the U.S. dollar,” said Thomas Averill, a managing director in Sydney at Rochford Capital, a currency and rates risk-management company. “The market is positioned for a dovish statement and the risk is that it disappoints.”