USD Index Hits 31-Week Low Amid Fed Rate Cut Speculation

Here’s this week’s overview of the US Dollar:

• In the past week, the US Dollar Index declined by 1% against a trade weighted basket of its peers. The DXY index stood at 102.4 on Friday, a 31-week low. The dollar index was weighed down by expectations that the Federal Reserve will have to lower borrowing costs soon to avert an economic downturn.

• On Friday, Chicago Fed President Austan Goolsbee said that the US labour market and some leading economic indicators are flashing warning signs, citing rising levels of credit card delinquencies.

• Weaker than expected US housing starts numbers for July also added to the bearish sentiment.

• Markets see a probability approaching 100% that the Fed will cut rates by 25 basis points in September, with a larger 50 bps reduction still on the table.

• Investors now look ahead to Fed Chair Jerome Powell’s speech in Jackson Hole and the latest FOMC minutes later this week for further guidance on the monetary policy path.

• The Dollar had losses against most major currencies but regained some ground versus the Yen in the past week.