The U.S. dollar hovered near an eight-day high on Thursday as a pair of domestic economic releases reinforced expectations that the Federal Reserve may raise interest rates next month, while a broader gauge of the currency’s performance trimmed its weekly loss.
The ICE U.S. Dollar Index, which tracks the greenback against six major peers, rose 0.05% to 99.18, having earlier touched its highest level since Aug. 19. The index had fallen 0.83% in the prior week before paring declines to a weekly loss of 0.35%.
A report from the Labor Department showed initial jobless claims fell to a seasonally adjusted 203,000 last week, below the 208,000 estimate and marking a second consecutive weekly decline. Separate data from the Census Bureau showed the U.S. goods trade deficit widened to $118.8 billion in July, up from $101.4 billion in June and the largest gap since March 2025.
The figures contributed to a brief lift in market-implied odds of a September rate hike to over 40%, according to CME FedWatch data. Expectations for at least a 25-basis-point increase slipped back to 35.9% on Thursday, reflecting some consolidation after the earlier surge.
The dollar strengthened 0.09% against the Japanese yen to 159.45, while the euro dipped 0.03% to $1.1646. Sterling eased 0.06% to $1.3585 as investors reduced wagers on a Bank of England rate hike.
Federal Reserve Chair Kevin Warsh is scheduled to speak at the Jackson Hole symposium on Friday, an event that has historically influenced currency markets. BNY Senior EMEA Market Strategist Geoff Yu noted that the clearest pattern from the past three years of the symposium has been "persistent dollar selling into and through month end," with the speech determining the magnitude rather than the direction of seasonal flows.
Erik Bregar, director of FX and precious metals risk management at Silver Gold Bull in Toronto, said the dollar’s resilience was surprising given conflicting signals from policy makers. He pointed to remarks from Warsh, who has emphasized the need for clearer price signals from bond markets, and U.S. Treasury Secretary Scott Bessent, who announced plans to double quarterly repurchases of longer-dated bonds.
"I'm surprised the dollar's not a bit stronger actually. The FX market, honestly, is in a bit of a trance," Bregar said. "Warsh is saying the Fed needs to speak less so that the price signals from the bond market are cleaner, and then Bessent wants to distort those signals by intervening. It makes no sense."
