US dollar slides to eight-month low
The greenback just weakened to its lowest level in eight months as Wall Street bets that the Federal Reserve will cut interest rates more aggressively than previously thought.
The US Dollar Index, which captures the currency’s strength against six of its peers, fell on Monday to a intraday low of 102.18. That’s the dollar’s weakest performance since December, though it gained some ground by midday. The index is on track to close at its lowest level since January, extending a steep decline that began Friday when the latest batch of labor data showed that the US job market might be deteriorating.
Signs of the US economy’s resilience, coupled with the Fed’s stance of keeping rates higher for longer, helped boost the dollar earlier this year. The dynamics are a lot different now: Inflation has resumed a downward trend, unemployment rose last month to its highest point since October 2021 and the Fed gave some key hints at its policy meeting last week that it will likely cut rates in September.
“The stronger dollar prevails as the Fed’s ‘higher for longer’ mantra remains intact, although as the currency market perceives that the Fed is firmly committed to initiating an easing cycle, the dollar should soon soften vis-Ã -vis its global peers,” analysts at LPL Financial wrote in a note to clients Monday. “The dollar should ease as monetary policy transitions towards a more moderate stance with either concerns over the economic landscape or declining inflation serving as catalysts.”
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