Dollar six-day slide ends on new tariffs as Jackson Hole meet begins

NEW YORK (Reuters) - The U.S. dollar stanched a six-day losing streak on Thursday as a new round of punitive U.S.-China tariffs boosted the greenback and the annual Federal Reserve conference in Jackson Hole, Wyoming began.

A money changer counts U.S. dollar banknotes at a currency exchange office in Izmir, Turkey August 16, 2018. REUTERS/Osman Orsal/File Photo

The United States and China escalated their months-long trade dispute, implementing 25 percent tariffs on $16 billion worth of each other’s goods. That boosted the dollar, which has benefited from President Donald Trump’s protectionist policies and from a flight to quality as geopolitical tensions mount.

Talks between U.S. and Chinese officials in Washington over trade will continue on Thursday, although most analysts do not expect much headway to be made, with risks growing that the conflict will descend into a growth-sapping tariff war.

The preliminary talks “look unlikely to yield too much in the way of progress as they enter a second day, with the U.S. president, given his current political difficulties, unlikely to want to concede any further ground,” said CMC Markets analyst Michael Hewson.

Minutes from the Federal Reserve’s last meeting, released on Wednesday, showed that officials had examined how global trade disputes could affect businesses and households, suggesting that the market’s perceived path for monetary tightening could have to change if the trade conflict upsets the U.S. economy.

The greenback strengthened 0.67 percent against the offshore yuan CNH=, last trading at 6.891 yuan per dollar.

The dollar index .DXY gained 0.55 percent to 95.687, moving off a near three-week low of 94.934 reached overnight.

The dollar’s move, however, was relatively modest as the market awaited the outcome of the annual central bankers’ conference in Jackson Hole, Wyoming, from Thursday through Friday.

“Jackson Hole is likely to have zero implications for near-term monetary policy. The Fed is on autopilot for the rest of the year,” said Jason Thomas, chief economist at AssetMark. “The burden of proof is on not raising rates at the next two or three meetings.”

Fed Chairman Jerome Powell, due to speak on Friday, is expected to signal rate hikes will continue, given 3.9 percent unemployment and inflation that is now near the Fed’s 2 percent target.

The euro was down about 0.55 percent at $1.153 EUR=, easing from a two-week high of $1.162.

The single currency was little moved by a widely followed survey showing that the growth of euro zone businesses picked up a touch this month, although not as much as predicted.

The Australian dollar dropped 1.4 percent and was last at $0.724 AUD= as Prime Minister Malcolm Turnbull clung to power after several of his senior ministers called for a second leadership vote.

The Japanese yen JPY= weakened 0.65 percent to 111.26 on safe-haven demand for the dollar.

(This version of the story corrects losing streak in headline and first paragraph to six-day, not five-day. The error also appeared in previous dollar reports.)

Reporting by Kate Duguid and Tommy Wilkes; Editing by Steve Orlofsky and Richard Chang