Investing.com – The U.S. dollar fell lower on Tuesday, falling close to a seven-month low, amid growing belief that the Federal Reserve will cut interest rates in September.
At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.3% lower at 101.667 and trading around its lowest level since early January.
The dollar is weakening due to optimism about the Fed’s interest rate cut
The dollar has fallen more than 2% in the past month, along with US Treasury yields, amid growing optimism that the US central bank will cut interest rates in September.
Fed Chairman Jerome Powell is scheduled to speak on Friday, and traders are looking for more clues about when and by how much the central bank will cut rates.
“We think Powell’s view will be reassuring and consistent with a soft baseline of a range of 25, but he will make clear that the Fed is open to 50 and that the bar for this is not very high,” Evercore ISI said.
“However, we do not expect any strong guidance on whether the first step will be a 25bp or 50bp cut,” Evercore ISI added. Instead, Powell is expected to suggest the decision will depend on upcoming labor data.
The Fed has kept its benchmark rate within the current range of 5.25%-5.50% since July last year, and traders have fully priced in a 25 basis point Fed rate cut in September, with a 24.5% chance of a 50 basis point interest rate. bp move.
EUR/USD at its highest this year
In Europe, it traded largely unchanged at 1.1086, with dollar weakness pushing the euro to this year’s high.
The single currency is up about 2% this month and is on track for its strongest monthly performance since November.
The eurozone remained stable in July, with an annual gain of 2.6%, confirming that inflationary pressures remain subdued.
traded 0.2% higher at 1.3009 and climbed to a one-month high, with the pound benefiting from dollar weakness.
Traders are divided over the chances of another rate cut in a month’s time, after a rate cutting campaign was launched in a close call decision earlier this month.
Yen Stable Before Ueda Speech
In Asia, the index fell 0.1% to 146.35, close to the previous session’s high of almost two weeks, but quite a distance from the seven-month low of 141.67 reached in early August.
Investor attention will turn to Kazuo Ueda, governor of the Bank of Japan, when he appears in parliament on Friday. Ueda is expected to discuss the BOJ’s decision last month to raise rates and the focus will be on whether he maintains his recent hawkish tone.
traded flat at 7.1395 and received little support from the People’s Bank of China, which left its benchmark unchanged as expected.
The August support came after the PBOC unexpectedly cut the LPR in July as it took action to further stimulate economic growth.
