Dollar gains, Fed's Powell expected to remain hawkish

Dollar gains, Fed's Powell expected to remain hawkish

* Graphic: World FX rates Link

By Karen Brettell

NEW YORK, Aug 24 (Reuters) - The dollar gained against a basket of currencies on Wednesday, holding near a 20-year high as investors waited for a Friday speech by the Federal Reserve chairman for fresh clues on how aggressive the central bank will be in its battle against inflation.

Investors have pared back expectations that the Fed could tilt to a slower pace of rate hikes as inflation remains at 8.5% on an annual basis, well above the Fed's 2% target.

Jerome Powell's speech in Jackson Hole will be scrutinized for any indication that an economic slowdown might alter the Fed’s strategy.

"While the market might be swinging back and forth between inflation and recession, the central banks aren't. They are focused, it seems to be nearly exclusively, on inflation," said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

Fed funds futures traders are pricing in a 61% chance that the Fed will hike rates by another 75 basis points at its September meeting, and a 39% probability of a 50 basis points increase. FEDWATCH

The dollar index =USD was last up 0.13% at 108.67, holding just below a 20-year high of 109.29 reached on July 14.

The greenback could give back some gains on Friday if Powell expresses any concerns about the impact of the monetary tightening.

"The market has this habit of reading the Federal Reserve as dovish - we saw that with the FOMC minutes," said Chandler. "To me what this means is that the dollar remains bid ahead of Powell on Friday at 10 am, and then afterwards the market’s going to read him dovishly and sell it off."

The dollar gained even after data on Wednesday showed that new orders for U.S.-made capital goods increased at a slower pace in July from the prior month, suggesting that business spending on equipment could struggle to rebound after contracting in the second quarter.

Other data on Wednesday showed that the U.S. economy likely created 462,000 more jobs in the 12 months through March than previously estimated.

The euro EUR=EBS was down 0.06% against the U.S. dollar at $0.9961, after hitting a 20-year low of $0.99005 on Tuesday.

The single currency has been hurt by growth concerns as the region faces an energy crisis. Front-month Dutch gas TRNLTTFMc1 , the benchmark for Europe, rose again on Wednesday as the prospect of a halt to Russian gas supplies through the main Nord Stream 1 pipeline for three days kept investors on edge.

"The sharp jump in gas prices and the uncertainty about this going forward will continue to weigh on the euro for the time being," said DNB Markets FX analyst Ingvild Borgen Gjerd.

Cyclical currencies such as the Australian and New Zealand dollars were also under pressure from fears of a global growth slowdown.

The Aussie AUD-D3 fell 0.36% to $0.6903 and the kiwi NZD=D3 slumped 0.53% to $0.6180. ========================================================

Currency bid prices at 3:02PM (1902 GMT) Description

RIC

Last

U.S. Close Pct Change

YTD Pct

High Bid

Low Bid

Previous

Change

Session

Dollar index

=USD

108.6700

108.5500

+0.13%

13.597%

+109.1100 +108.3500 Euro/Dollar

EUR=EBS

$0.9961

$0.9967

-0.06%

-12.38%

+$1.0000

+$0.9910 Dollar/Yen

JPY=EBS

137.1150

136.7500

+0.26%

+19.09%

+137.2350 +136.1750 Euro/Yen

EURJPY=

136.57

136.31

+0.19%

+4.80%

+136.7700 +135.5300 Dollar/Swiss

CHF=EBS

0.9672

0.9641

+0.31%

+6.02%

+0.9687

+0.9608 Sterling/Dollar GBP=D3

$1.1786

$1.1834

-0.40%

-12.85%

+$1.1837

+$1.1757 Dollar/Canadian CAD=D3

1.2976

1.2959

+0.14%

+2.63%

+1.3018

+1.2954 Aussie/Dollar

AUD=D3

$0.6903

$0.6929

-0.36%

-5.02%

+$0.6932

+$0.6880 Euro/Swiss

EURCHF=

0.9632

0.9607

+0.26%

-7.11%

+0.9650

+0.9559 Euro/Sterling

EURGBP=

0.8448

0.8422

+0.31%

+0.57%

+0.8456

+0.8409 NZ

NZD=D3

$0.6180

$0.6213

-0.53%

-9.71%

+$0.6218

+$0.6164 Dollar/Dollar

Dollar/Norway

NOK=D3

9.6910

9.7180

-0.24%

+10.05%

+9.7495

+9.6560 Euro/Norway

EURNOK=

9.6573

9.6825

-0.26%

-3.58%

+9.6997

+9.6099 Dollar/Sweden

SEK=

10.6162

10.6242

-0.18%

+17.72%

+10.6821

+10.5801 Euro/Sweden

EURSEK=

10.5750

10.5941

-0.18%

+3.33%

+10.6155

+10.5598
Additional reporting by Samuel Indyk in London; Editing by Kirsten Donovan and Nick Zieminski