(Reuters) – The dollar rose on Thursday as investors awaited for U.S. job data ahead of the Federal Reserve’s Jackson Hole symposium, while the Turkish lira rallied after a larger-than-expected central bank rate hike.

Investors were cautious after softer-than expected data in Europe and the U.S. muddied the economic outlook sending the safe-haven dollar higher.

The dollar index, which measures the greenback against a basket of six major currencies, rose 0.36% to 103.72, bouncing from Wednesday’s drop, and set for a monthly rise.

Investors said they did not expect sharp moves as the U.S. report job data later in the day as markets were cautious in case of possible surprises when Fed Chair Jerome Powell speaks at Jackson Hole on Friday.

On Wednesday, 10-year U.S. yields recorded their sharpest one-day slide in more than three months after data showed U.S. business activity growth in August was its weakest since February as the economy seems to be starting to stall.

“As the Jackson Hole symposium gets under way, market participants are looking for direction,” said Isabel Albarran, Investment Officer at Close Brothers Asset Management.

“Talk of stronger-than-expected data could point to ongoing inflation concerns, while a focus on the cooling labour market, weak PMIs and downward trending CPI may point to rates being close to the peak,” she added.

MORE COULD COME

Elsewhere, the Turkish lira rallied, up 3% to 26.4040 against the dollar after the Turkish Central Bank hiked the 1-week repo from 17.5% to a much-larger-than expected 25%. [EMRG/FRX]

According to the median estimate in a Reuters poll, economists were expecting policy rate to increase to 20%.

Turkey’s central bank embarked on a tightening cycle in June after President Tayyip Erdogan appointed former Wall Street banker Hafize Gaye Erkan as governor.

The central bank on Thursday repeated its pledge to tighten policy further as necessary in a gradual manner, even as it raised its one-week repo rate by an aggressive 750 basis points.

“Today’s decision sends a very strong signal that the CBRT (central bank) is determined to rein in inflation and the initial market response is very positive,” said Piotr Matys, Senior FX Analyst at Touch Capital Markets in London.

WEAK GROWTH

Adding to evidence of a faltering economy, surveys showed on Wednesday that Europe’s manufacturing output continued to shrink and services activity fell into decline, dampening any boon for the euro. The single currency fell 0.2% to $1.0839, after touching a two-month low on Wednesday.

British factory output slumped, leaving the economy on course for recession and prompting markets to trim expectations for further rate hikes from the Bank of England.

The pound fell 0.7% to $1.2653, moving towards an almost 2-month low hit on Wednesday.

“PMI data suggests that the outlook is not as great as one would hope and that might suggest some caution on the part of developed market central banks in terms of further tightening,” said Bank of Singapore currency strategist Moh Siong Sim.

China’s yuan, which has been supported by state-bank buying in recent sessions, steadied at 7.2818 per dollar.