SINGAPORE, Aug 21 (Reuters) - The U.S. dollar drifted on Thursday as investors awaited policy cues from the Federal Reserve's Jackson Hole symposium while keeping an eye on renewed concerns over central bank independence after President Donald Trump's latest salvo.
Currencies showed a muted reaction to the announcement that the United States and the European Union locked in a framework trade deal reached last month that includes a 15% U.S. tariff on most EU imports.
The euro and sterling were flat at $1.1649 and $1.3460, respectively. The Japanese yen declined 0.3% to 147.85 while the Swiss franc nursed modest losses as well.
Odds of a rate cut by the Fed next month eased slightly to 79%, offering mild support to the dollar as focus remained on whether Fed Chair Jerome Powell will push back against market expectations for a September cut when he speaks on Friday.
There would likely be a greater reaction if Powell were to indicate the Fed could keep rates steady again, than if he leans in the direction of a cut, said Kenneth Broux, head of corporate research for FX and rates at Societe Generale.
"The risks are asymmetric. Because it (a cut) is already priced in, the risk is that we go back to 50-50," said Kenneth Broux, head of corporate research for FX and rates at Societe Generale.
The reaction to that would be a sell-off in near-tenor U.S. treasuries and a firmer dollar, Broux said.
President Trump's call for Fed Governor Lisa Cook to resign on the basis of allegations made by one of his political allies has meanwhile revived investor concerns over his efforts to gain influence over the central bank.
Trump has also repeatedly criticised Powell for being too slow to cut rates. Investors expect Trump will replace Powell, whose term ends in May, with a more dovish appointment.
"Trump’s desire for lower rates, even if not justified by the Fed’s dual mandate, poses upside risks to the US inflation outlook and could trigger a loss of confidence in the US dollar and long-term US Treasuries if implemented," Lee Hardman, senior currency analyst at MUFG, said in a note.
Earlier this month, Trump also said he would nominate Council of Economic Advisers Chairman Stephen Miran to serve out the final few months of a vacant Fed seat after Adriana Kugler unexpectedly resigned.
The dollar index , which measures the U.S. currency against six other peers, was flat at 98.337 and on course for a 0.4% rise this week.
The benchmark U.S. 10-year yield was a touch higher at 4.30%, while the two-year yield, which is more sensitive to the monetary policy, ticked up slightly to 3.756% .
Some analysts cautioned that markets could end up being disappointed by Powell's speech on Friday, noting that the impact of Trump's tariffs on inflation remains unclear.
Elsewhere, the Norwegian krone rose 0.6% each against the dollar and the euro , after data showed that Norway's mainland economy grew at a faster pace than economists had expected in the second quarter. First quarter growth was also revised up.
Bearish bets on China's yuan, meanwhile, hit their highest since mid-May, with analysts turning short spurred by mounting concerns over the economy, a Reuters poll showed on Thursday.
In cryptocurrencies, bitcoin was down 0.8% at $113,527 while ether fell 1.3% to $4,303.89.
Reporting by Jaspreet Kalra in Mumbai and Ankur Banerjee in Singapore Editing by Shri Navaratnam, Aidan Lewis, Toby Chopra
