TLDR
- The Dollar Spot Index fell to 99.33, its lowest level since June 5
- Weak U.S. jobs, retail sales, and inflation data drove the decline
- Money markets now price a 70% chance the Fed holds rates in September
- The Japanese yen traded near 159.00 despite a GDP miss; Bank of Japan may hike in September
- The Indian rupee faced selling pressure as the RBI tightened its forex defense measures
The U.S. dollar fell to its lowest level in over two months on Monday. The Dollar Spot Index dropped 0.3% to 99.33, a level not seen since June 5.
The move came after a run of soft U.S. economic data. July nonfarm payrolls contracted, retail sales fell 0.6%, and both the Consumer Price Index and Producer Price Index came in flat or on target.
That data combination removed the case for the Federal Reserve to raise rates in the near term.
Money markets now put a 70% probability on the Fed holding rates steady at its September meeting. Before the August 7 payrolls report, the odds of a rate hike were above 50%.
The euro climbed to a two-month high of $1.1614. Sterling hit a three-month high of $1.3571. Both benefited as rate expectations shifted away from the dollar.
Fed Chair Kevin Warsh has avoided giving forward guidance, putting the focus on incoming data. Analysts say that stance has made markets more sensitive to each economic release.
Commerzbank analyst Volkmar Baur said if markets continue to trim rate hike bets, the dollar could fall further. His bank expects three Fed rate cuts next year.
Traders are now watching Wednesday’s release of the July Federal Open Market Committee meeting minutes. The Fed held rates at 3.5% to 3.75% for the fifth straight time in July.
Yen Holds Steady, Rupee Under Pressure
The Japanese yen edged 0.1% higher to trade around 159.00 per dollar, staying close to the 160 level that has put currency desks on alert for possible intervention.
Japan’s economy grew at an annualized rate of 1.1% in the second quarter, missing the 2% forecast. Weak private consumption and falling capital expenditure weighed on the result.
Despite the miss, the yen found support from reports that the Bank of Japan may raise rates as early as September.
The Indian rupee moved in the opposite direction from most currencies. The USD/INR pair rose 0.2% as local importers bought dollars, driven by ongoing energy risks tied to Middle East tensions.
The Reserve Bank of India shortened the deadline for banks to mobilize deposits under its foreign-exchange swap facility to August 31, from late September. The move came after inflows through that program exceeded $56 billion.
Geopolitical Risk Caps the Dollar’s Slide
Brent crude stayed near $89 a barrel as tensions in the Persian Gulf continued. Talks between Washington and Tehran over the Strait of Hormuz stalled over the weekend.
Iranian Foreign Minister Abbas Araqchi said Tehran has not decided to resume formal talks. President Trump warned Americans to expect higher gasoline prices.
Elevated oil prices are keeping pressure on emerging market currencies that import energy, limiting a broader rally.
The Jackson Hole Symposium will be the next major event for currency traders looking for signals on Fed policy direction
Stop guessing and start investing with confidence. KnockoutStocks gives you the AI insights, market intelligence, and stock research you need to spot opportunities, cut through the noise, and make smarter investment decisions — all in one powerful platform.
Sign up today and get 50% OFF full access to our premium stock picks.
Simply use coupon code SPECIAL50 at checkout to claim your exclusive discount.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
