* Dollar rises off one-week lows ahead of Jackson Hole summit
* Korean won falls after rate hike
* Implied euro-dollar volatility at a one-week low
* Graphic: World FX rates tmsnrt.rs/2RBWI5E
LONDON, Aug 26 (Reuters) - The dollar rose from one-week lows on Thursday, supported by U.S. Treasury yields holding above 1.34% in a quiet market where focus was firmly trained on what signals the Federal Reserve might send at its annual Jackson Hole conference.
The conference kicks off later in the day in virtual format but the main event is Fed boss Jerome Powell’s speech on Friday where he is widely expected to signal when the central bank could start unwinding its monetary stimulus.
Bond markets sold off heavily on Wednesday, partly on back of investors hedging their bets ahead of the speech, taking 10-year Treasury yields to almost two-week highs.
The dollar index, which measures the currency against six rivals, edged up 0.12% to 92.933 after dropping to 92.801 for the first time since Aug. 17. Against the euro, it was at $1.1761, near a one-week low of $1.1775 hit on Wednesday.
Currency market swings have also eased ahead of the speech, with implied euro-dollar volatility at a one-week low
Markets are assessing how the Fed will react to signs inflation could be less transitory than it had flagged and whether it will stick to its new policy framework of letting inflation run hot.
While Powell has held a dovish tone, there are clear signs of dissent within the Fed.
“The last time FX markets moved a long way was after the June FOMC meeting. It suddenly seemed as if the new Fed is quite similar to the old one, in that they will hike rates at the first sign of inflation,” Mizuho senior economist Colin Asher said.
He noted that strong global economic growth indicated a softer dollar but the Fed stance would be key.
“I was in the camp that new Fed is the new Fed but if it’s still the old one, it’s a less benign backdrop and the dollar will remain reasonably well supported.”
Signals of a taper starting this year had lifted the dollar index to a 9-1/2-month high of 93.734 last Friday.
But that was before Dallas Fed President Robert Kaplan, among the most forceful advocates for starting to reduce support for the economy, said he may need to adjust that view if the coronavirus slows economic growth materially.
The greenback slipped 0.15% to the yen but the pair is meandering near the centre of its trading range since early July .
Meanwhile, more central banks worldwide are exiting or contemplating exiting from ultra-easy accommodative policies. South Korea’s central bank on Thursday raised interest rates for the first time in three years
The won gave up initial gains, however, to fall 0.6% after the hike which had been well-flagged.
Reporting by Sujata Rao; additional reporting by Kevin Buckland in Tokyo; Editing by Toby Chopra
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FOREX-Dollar rises off one-week low as 2021 taper bets grow - Reuters
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