Dollar in Limbo as Bulls Betting on Rate Tightening Await Yellen

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Exporters were mixed, with Toyota Motor Corp up 0.1 percent, Nissan Motor Co rising 1.1 percent and Panasonic Corp declining 1.6 percent.

Investors in the currency markets are not convinced that the Fed will raise interest rates before December this year after seeing a string of negative economic data, including a weak economic expansion and muted inflation for the month of July.

EUR/USD was up 0.11% at 1.1332, off session highs of 1.1355 after research group Markit reported that Germany's manufacturing purchasing managers' index slipped to a two-month low of 53.6 in August from 53.8 the previous month, confounding expectations for a slip to 53.5. Hawkish comments from some Fed officials last week seemed to conflict with the minutes of the most recent Fed meeting. As it now stands, traders are pricing in a slightly better than one-in-two chance of a 2016 rate hike, according to the 30-day Fed Fund futures prices. The local unit had hit a high of 67.10 and a low of 67.20. Hong Kong's Hang Seng closed practically unchanged at 22,998.93 and the Shanghai Composite Index in mainland China edged up 0.2 percent to 3,089.71.

The financial index rose 0.47 percent.

Best Buy surged 19.6 percent as the best performer on the S&P 500 after the electronics retailer posted an unexpected quarterly profit. Aggregate volume in futures trading was 17 percent below the 100-day average for this time, according to data compiled by Bloomberg.

Zoe's Kitchen plunged 18.4 percent to $30.28 after the restaurant chain operator's second-quarter revenue missed analysts' expectations.

Fed chair Janet Yellen is scheduled to speak August 26 in Jackson Hole, Wyoming, and experts expect her remarks to be similarly optimistic.

Declining issues outnumbered advancing ones on the NYSE by a 2.19-to-1 ratio; on Nasdaq, a 1.82-to-1 ratio favored decliners.

S&P 500 e-minis were up 4.75 points, or 0.22 percent, with 145,879 contracts traded.

The British pound, meanwhile, rose to a three-week high against the dollar at $1.3227. Recent hawkish statements by Fed officials including Vice Chairman Stanley Fischer and New York Fed President William Dudley have prompted some investors to raise bets that US interest rates will rise sooner rather than later, and some believe Yellen will echo their signals.

"The markets now have March priced in for the next rate hike, and if Yellen is seriously determined to move earlier, she must take advantage of Friday's opportunity to drive that message home", Erlam said.