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Dollar rises to a five-week high on Fed hawkishness ahead of Jackson Hole.

The US dollar index rose to a new five-week high on Monday after another Federal Reserve official signaled that aggressive monetary tightening would likely continue ahead of the central bank's key Jackson Hole symposium this week.


After Russia announced a three-day halt to European gas supplies via the Nord Stream 1 pipeline at the end of this month, the euro fell to a new five-week low, exacerbating the region's energy crisis.

China's yuan fell to its lowest level in nearly two years after the central bank cut key lending rates, adding to a slew of monetary easing measures aimed at bolstering an economy battered by COVID-19 restrictions and a property crisis.

The US dollar index, which compares the greenback to six rival currencies, including the euro, rose to 108.26 for the first time since July 15 and was last up 0.074% at 108.23.

This comes after a 2.33% gain last week, its best weekly gain since April 2020, amid a chorus of Fed policymakers emphasizing the importance of doing more to rein in decades-high inflation.

Richmond Fed President Thomas Barkin stated on Friday that the "urge" among central bankers is for faster, front-loaded rate increases.

"Fed speakers have been emphasizing the message that more rate hikes are on the way given that the battle against inflation has not yet been won," jittering markets ahead of Jackson Hole on Aug.

25-27, amid growing expectations for Fed Chair Jerome Powell to emphasize that tightening is "still a long way from ending," according to Rodrigo Catril, senior FX strategist at National Australia Bank, in a client note.

Money markets currently place a 47.5% chance on another 75 basis point rate hike on September 21, with a 52.5% chance on a half-point increase.

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With recession risks on the rise, economists polled by Reuters predict a 50 basis-point increase.

In Tokyo trading on Monday, benchmark 10-year US Treasury yields surpassed 3% for the first time since July 21.

The dollar rose to 137.40 yen, its highest level since July 27, against Japan's yen, which is extremely sensitive to US yields.

The dollar climbed to 6.8308 yuan in onshore trading for the first time since September 2020 after the People's Bank of China cut one- and five-year loan prime rates, as expected.

This comes after it unexpectedly reduced borrowing costs last week.

The dollar reached 6.8520 against the offshore yuan, its highest level since September 2020.

Meanwhile, the euro fell to $1.0026 for the first time since July 15 before recovering 0.13% to $1.0027.

Sterling dropped 0.23% to $1.1805, closing in on Friday's five-week low of $1.17925.

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