The U.S. dollar on Thursday retreated from a two-decade high against a basket of major currencies as investors awaited a speech by Federal Reserve Chairman Jerome Powell the next day in search of new clues about further monetary policy.

 

The dollar index, which measures the dollar against six major currencies, fell 0.15% to 108.47 but remained close to the highest since September 2002 at 109.29 reached in mid-July.

 

Investors had expected the Fed at its annual meeting in Jackson Hole, Wyoming, to double its commitment to suppress inflation.

 

Money markets have dampened expectations that the U.S. central bank could move to a slower pace of rate hikes following a chorus of Fed hawkish comments in recent weeks, and now the chances of another super-large 75 basis point rate hike next month are 60.5% versus a 39.5% chance of a half-point rate hike.

 

Expectations of FOMC Chairman Powell's hawkish message to Jackson Hole are likely to keep upward pressure on the U.S. dollar," Commonwealth Bank of Australia analyst Christina Clifton wrote in a client note.

 

"However, there is a risk that the speech will be considered insufficiently hawkish, and we will see some rollback of the US dollar."

 

The dollar retreated 0.25% to 136.775 yen, but remained near this week's one-month high of 137.705.

 

The euro rose 0.14% to $0.99825 after falling to a 20-year low of $0.99005 on Tuesday.

 

The single currency has been hit by concerns about economic growth as the region faces an energy crisis and investors are in tension before Russia halts gas supplies via the main Nord Stream 1 gas pipeline for three days from Wednesday for unscheduled maintenance.

 

Sterling rose 0.17% to $1.18105 after falling on Tuesday to its lowest level since March 2020 of $1.1718.

 

The Australian dollar rose 0.19% to $0.6920, rising from a more than one-month low of $0.6856 at the start of the week.

 

The New Zealand kiwi lagged behind its antipode counterpart, rising 0.06% to $0.6194, thwarted by data on declining retail sales. On Monday, it hit a one-month low of $0.6157.