Dollar pauses for breath ahead of Jackson Hole

© Reuters. FILE PHOTO: U.S. Dollar banknote is seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration

By Rae Wee

SINGAPORE (Reuters) - The U.S. dollar steadied just below recent peaks on Wednesday, as investors waited to hear from the Federal Reserve and pondered whether weak U.S. data may slow the pace of rate hikes.

Disappointing U.S. services and manufacturing surveys released overnight and a plunge in new home sales last month knocked the greenback from a 20-year high on the euro, though not particularly hard as growth concerns are deeper in Europe.

The euro briefly bought $1 in New York trade, but was back under pressure at $0.99485 in the Asia trade - barely above Tuesday's low of $0.99005. The yen steadied at around 136.73 per dollar.

The U.S. S&P Global (NYSE:SPGI) flash composite PMI for August dropped to 45 - the lowest since May 2020 and in contractionary territory for a second straight month, while new home sales hit a 6-1/2 year low.

Sterling found some support overnight after Britain's composite Purchasing Managers Index number managed to stay in growth territory, though it hasn't really pierced investors' gloom over British or Europe's outlook.

The pound stood at $1.1810, after hitting a 2-1/2 year low of $1.1718 on Tuesday.

"It really is just a matter of time before the hard data reflects the reality of the brutal energy price rises confronting U.K. households," said Ray Attrill, head of FX strategy at National Australia Bank (OTC:NABZY).

Meanwhile, the Australian and New Zealand dollars remained at the mercy of global recession fears.

The Aussie fell 0.38% to $0.6903, while the kiwi slumped 0.42% to $0.6187.

All eyes now turn to Jackson Hole, Wyoming, where the Federal Reserve holds its annual symposium and Fed Chair Jerome Powell is due to speak on Friday.

The U.S. dollar index, which measures the dollar against a basket of currencies, rose 0.12% to 108.68 on Wednesday, and July's two-decade high of 109.29 beckons.

"The Jackson Hole symposium is not really going to give us a huge amount of reasons to want to sell dollars," said Chris Weston, head of research at Pepperstone in Melbourne.

"I think Powell might keep his foot down, and that continues to make us want to buy dollars. Any kind of pullback in the dollar remains a buying opportunity."

Minneapolis Fed Bank President Neel Kashkari repeated the need for more aggressive rate hikes to control inflation in a speech on Tuesday.