What’s going on here?
The US dollar hit its lowest level in 2024 against major currencies this week, pressured by softer jobs data and decreased bond yields.
What does this mean?
The greenback’s been losing ground, hitting its lowest against the euro this year and dipping below 145 yen. US bond yields also saw their sharpest drop since early August, triggered by unexpectedly weak job figures. This has made US Treasuries less attractive compared to overseas bonds, according to Chris Weston from Pepperstone. Amid this backdrop, markets are eagerly awaiting updates to US payroll data. Initially, the August jobs report spurred speculation about a significant rate cut, but recent trends have tempered those expectations, with the odds sitting at 72% for a quarter-point cut. All eyes are now on Fed Chair Jerome Powell’s speech at the upcoming Jackson Hole symposium for clues about future rate cuts.
Why should I care?
For markets: Dollar in doldrums.
The fall in the US dollar index, reaching its lowest since early January, has investors recalibrating their positions. The index dipped to 101.30 before inching up to 101.48. Meanwhile, the euro and sterling hit highs of $1.1132 and $1.3054 respectively. The dollar showed volatility against the yen, trading higher at 145.75 yen after briefly falling to 144.945 yen. These movements reflect shifting investor sentiment as markets adjust to evolving economic indicators and Federal Reserve expectations.
The bigger picture: Global ripple effects.
The dollar’s decline is resonating globally, impacting currencies like the Australian and New Zealand dollars, which reached their highest points since early July. Additionally, the Japanese parliament is set to review the Bank of Japan’s interest rate decisions in a special session, with Governor Kazuo Ueda’s testimony in the spotlight. Economists like Ryota Abe from SMBC predict the dollar could weaken further, potentially hitting 138 yen by the end of 2024, depending on the pace of the Fed’s rate cuts.
