Dollar inches up ahead of Jackson Hole policymakers' meeting

NEW YORK (Reuters) - The dollar edged higher on Thursday after another politically-driven slide against the euro and yen the previous session, as investors shifted focus away from government tension in Washington to an upcoming global central bankers’ gathering.

FILE PHOTO: Bank notes of different currencies, including Euro, U.S. Dollar, Turkish Lira or Brazilian Reais, are photographed in Frankfurt, Germany, in this illustration picture taken May 7, 2017. REUTERS/Kai Pfaffenbach/Illustration /File Photo

But the dollar’s respite was expected to be temporary as investors awaited key speeches from Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi at the Jackson Hole Economic Policy Summit in Wyoming. Still, no new policy messages are expected from either official.

“I am not expecting anything outside of what has been communicated,” said Minh Trang, senior FX trader, at Silicon Valley Bank in Santa Clara, California.

“But the main conversation has been and would still be on the inflationary pressures or the lack thereof in the U.S. economy. This would be an ongoing dialog,” he added.

The dollar has dropped 14 percent against the euro this year, driven by a collapse in expectations for tax cuts and other pro-growth moves by the administration of U.S. President Donald Trump that has weakened the case for further rises in U.S. rates.

Stronger-than-expected data on U.S. initial jobless claims on Thursday helped the dollar stay positive on the day, but analysts were skeptical those gains could be sustained. Data showed initial claims rose to 234,000 for the week ended Aug 19.

“Today’s data will do little to shift the market’s bearish view of the dollar,” said Dennis de Jong, managing director at online FX broker in Limassol, Cyprus. “Trump’s ‘government shutdown’ claims have done nothing to help investors buy the greenback.”

Trump threatened Tuesday to shut down the government if Congress fails to secure funding for his wall along the U.S. border with Mexico. His threat rattled markets and drew rebukes from some Republicans.

In late trading, the dollar rose 0.4 percent to 109.49 yen JPY= and 0.1 percent to 93.272 against a major currency basket .DXY.

Some analysts suggested that Yellen could surprise the market and give a harder signal about a possible rate hike at its December policy meeting or on the reduction of the Fed’s balance sheet, which is expected to start next month.

Any such remark from the Fed chair will likely boost the dollar, which on Thursday was flat versus the euro. The single euro zone currency was last at $1.1801 EUR=.

The ECB’s Draghi, on the other hand, could talk down a recently surging euro, some analysts said, although Jane Foley, currency strategist at Rabobank, believes the euro’s uptrend is far from over.

Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by Patrick Graham in London; Editing by Bernadette Baum and Chizu Nomiyama