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US dollar firms with investors awaiting Jackson Hole

The US dollar drifted higher early in the European trading day, following its best week in more than a month, with investors eagerly awaiting the Federal Reserve’s economic conference.

The dollar index, a measure of the buck against six developed-market currencies, climbed 0.07 per cent, adding to its 0.39 per cent advance last week.

Traders took a cautious approach, with the conference in Jackson Hole, Wyoming looming just days away. Janet Yellen, the Fed chair, and European Central Bank head Mario Draghi are expected to take the spotlight at the event that has in past years been used by central bankers to unveil major policy shifts.

“It’s hard not to take note of the annual Jackson Hole symposium; it has moved markets before and can certainly do so again,” said Jordan Rochester, a currencies strategist at Nomura.

Mr Draghi is expected to garner exceptional attention amid speculation that he will take the opportunity to signal the beginning of the end to the ECB’s bond buying programme. At the start of the week, the common currency declined 0.2 per cent against to buck to $1.1738.

Still, investors are not not expecting much in the way of dollar gains on the heels of Jackson Hole. “With likely no new material policy indications from the Fed speakers at Jackson Hole (beyond what is already known and bearing in mind the latest Fed speakers’ growing division on the US inflation outlook) suggest a fairly limited Fed policy induced upside to dollar,” said Chris Turner, currencies strategist at ING.