Dollar Strengthens for Third Day Ahead of Jackson Hole, Kiwi Slumps on RBNZ Cut

The U.S. dollar extended gains on Wednesday, rising for a third straight session against the euro and sterling. Traders are now waiting for the Federal Reserve’s Jackson Hole symposium for fresh signals on the central bank’s policy outlook.

New Zealand Dollar Drops After Dovish RBNZ

The New Zealand dollar (NZD) tumbled after the Reserve Bank of New Zealand (RBNZ) cut its cash rate by 25 basis points to 3.0%, in line with forecasts.

However, policymakers revealed that they had also considered a larger 50-point cut. This sent a strong dovish signal and weighed heavily on the currency.

The kiwi fell 1.3% to $0.5820, its weakest level since April 14. The central bank also lowered its projected floor for the cash rate to 2.55%, compared with 2.85% in May.

Prashant Newnaha, rates strategist at TD Securities, noted that markets were not expecting such a dovish outlook. He now projects the cash rate could fall to 2.5% by November.

U.S. Dollar Index at Highest Since Mid-August

The U.S. dollar index (DXY), which measures the greenback against six major currencies, climbed to 98.441, its strongest since August 12. This marked a 0.4% gain over the first two days of the week.

• The euro slipped 0.1% to $1.1638
• Sterling eased 0.1% to $1.3480
• The dollar advanced 0.1% to 0.8080 Swiss franc
• Against the yen, it edged down 0.1% to 147.46

Powell’s Jackson Hole Speech in Focus

The highlight of the week will be Fed Chair Jerome Powell’s speech on Friday. Markets are watching closely for any pushback against expectations of a September rate cut.

Currently, traders see an 84% chance of a rate cut next month, with markets pricing in about 54 basis points of easing by year-end.

Kyle Rodda, an analyst at Capital.com, warned that Powell could surprise on the hawkish side. “There’s a risk that Powell pushes back against dovish market bets, which could pull the rug out from under investors,” he said.

Mixed U.S. Data Keeps Traders on Edge

Bets on a September cut surged after a weak payrolls report earlier this month. Consumer price data showing limited tariff pressures also fueled optimism.

However, last week’s stronger-than-expected producer price index (PPI) raised fresh doubts about the Fed’s next move. Powell has previously said he was reluctant to cut rates due to expected tariff-driven price increases.

Later Wednesday, the Federal Reserve will release minutes from its July 29-30 meeting, when it kept rates unchanged. But since that meeting took place before the weak jobs report, traders expect limited insights.

Bitcoin Pressured by Stronger Dollar

In cryptocurrency markets, Bitcoin traded near $113,612, after dipping earlier to $112,578, its lowest since August 3. The stronger dollar weighed on sentiment across digital assets.

Ethereum (ETH) held steady, trading around $4,170.