Aug. 22 (Bloomberg) -- The dollar headed for its biggest weekly gain versus the euro in more than six months before Federal Reserve Chair Janet Yellen and European Central Bank President Mario Draghi speak today in Jackson Hole, Wyoming.
The yen gained against all but two of its 16 major peers after Russian aid convoy crossed the border into Ukraine, which said the move amounted to an invasion. The U.S. currency retreated yesterday from an 11-month high against the euro, reached after minutes this week of the Fed’s July meeting suggested policy makers may increase interest rates sooner than anticipated. The pound headed for a seventh weekly drop versus the dollar, the longest run of losses in almost six years.
“The short-term market is reasonably long dollars, particularly against the euro, and just worried about being broad-sided by a particularly dovish speech from Yellen,” said Chris Turner, head of currency strategy at ING Groep NV in London. A long position is a bet an asset will rise.
The dollar was little changed at $1.3271 per euro as of 7:21 a.m. New York time from yesterday, when it reached $1.3242, the strongest level since Sept. 10. The U.S. currency was still set for a 1 percent weekly advance, the biggest since the period ended Jan. 31.
The yen gained 0.1 percent to 103.70 per dollar and strengthened 0.2 percent to 137.61 per euro.
The market “is weary of adding to longs ahead of Yellen,” ING’s Turner said. “Once that’s out of the way, we will probably see short-dated interest rates rise into the September Fed meeting and the dollar staying quite supported. If we were to see a selloff this afternoon, there will be plenty of buyers around” afterward.
The dollar may strengthen to $1.31 against the euro by the Sept. 17 Fed meeting and $1.28 by year-end, Turner said.
Russia is invading under the cover of the aid trucks, said Valentyn Nalyvaychenko, the head of Ukraine’s security council, according to the Interfax news service. More than 150 trucks entered the country through a border checkpoint in a rebel-held area. Ukraine allowed the convoy to enter to avoid provocations after failing to discuss its safety with the Russian side, the Ukrainian Foreign Ministry in Kiev said in a statement.
The Bloomberg Dollar Spot Index, which tracks the greenback versus 10 major counterparts, was little changed at 1,027.27 from yesterday, when it reached 1,029.64, the most since Feb. 4.
Yellen is scheduled to deliver a speech titled “Labor Markets” at the Jackson Hole symposium. The three-day meeting of central bankers and economists began yesterday.
Futures traders saw about a 51 percent chance the Fed will raise its key interest rate to at least 0.5 percent by July, according to data compiled by Bloomberg. The central bank has kept its benchmark rate at almost zero since December 2008.
“Expectation that Fed Chair Janet Yellen’s speech will be less hawkish at today’s Jackson Hole meeting is triggering a weaker dollar,” said Jude Noh, chief currency trader for Suhyup Bank in Seoul. “Investors are adjusting positions.”
The pound was less than 0.1 percent from the weakest level in fourth months as traders predict the Bank of England to delay raising borrowing costs until next year.
Forward contracts based on the sterling overnight interbank average, or Sonia, show investors have pushed back to May bets on a 0.25 percentage-point increase in the U.K.’s official bank rate of 0.5 percent, from a forecast of February earlier this month.
The pound was little changed at $1.6573 after declining to $1.6564 yesterday, the lowest since April 4. Sterling declined 0.6 percent this week. The seven weeks of losses is the longest streak since September 2008.