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Brace for Wild Swings After Hawkish Rhetoric at Jackson Hole

Traders are bracing for a tumultuous week after US and European officials said interest rates would likely remain higher for longer. Also, Bitcoin rose to its highest level in over six weeks on hopes that central banks may halt interest-rate rises that had hurt cryptocurrencies.

Aug 28, 2023

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Powell said Friday at the Kansas City Fed's annual conference in Jackson Hole, Wyoming, that the Fed is "prepared to raise rates further if appropriate" but that economic facts will define monetary policy.

Meanwhile, European Central Bank President Christine Lagarde pledged to raise borrowing prices as required until inflation returns to target.

After Powell's speech, Treasuries plummeted, raising policy-sensitive two-year paper rates to 5.09% and five-year note yields to their highest level since 2008.

Yen breached year-to-date lows to trade at 147 per dollar, raising worries over whether Japan may intervene to boost the currency. Equity prices rose.

This Fed discussion contrasts the Bank of Japan and the People's Bank of China.

Chinese officials have always supported the yuan, while Japanese authorities have said they are carefully monitoring it.

At Jackson Hole on Saturday, Bank of Japan Governor Kazuo Ueda did not discuss foreign exchange rates but said the price rise is slower than the central bank's target, explaining why authorities are maintaining its monetary policy.

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