Dollar Weakens; Euro and Aussie Gain Momentum
The US dollar weakened against several major currencies during Monday's trading (August 17) after a series of softer US economic data led markets to scale back expectations for a Federal Reserve interest rate hike. Concerns regarding a slowdown in US growth also prompted investors to reduce their dollar holdings.
Pressure on the greenback mounted after US retail sales for July fell for the first time in nine months, following weak labor market data and relatively subdued inflation. These conditions caused the probability of a Fed rate hike in September to drop to approximately 30.6%, down from around 52.2% the previous week.
The euro was among the currencies that benefited from the dollar's weakness; the EUR/USD pair briefly touched a two-month high and traded around 1.1583. The dollar also weakened against the Swiss franc, with USD/CHF falling to around 0.8098.
The Japanese yen strengthened slightly, trading around 159.36 per dollar, despite earlier data showing Japan's economic growth was weaker than expected. Market focus remains on the likelihood of a Bank of Japan rate hike, following joint intervention by Japan and the US in late July that helped curb the yen's depreciation.
Meanwhile, the Australian dollar posted solid gains, with AUD/USD rising about 0.5% to 0.7118. The dollar also weakened slightly against the offshore yuan to around 6.741, even though data on China's industrial production and retail sales came in weaker than anticipated.
Newsmaker Analysis: Pressure on the dollar continues to stem from shifting expectations regarding Fed policy following the softening of US labor, inflation, and consumption data. As long as the probability of a Fed rate hike remains low, the euro, Aussie, yen, and franc have room to sustain their gains. However, the dollar's future trajectory will depend heavily on policy signals from the Jackson Hole symposium and upcoming US economic data.
Source: Newsmaker.id
