Investing.com - The U.S. dollar weakened on Monday as investors awaited the release of the Federal Reserve's July meeting minutes and Chair Jerome Powell's speech at Jackson Hole later this week. The Dollar Index, which measures the greenback against other major currencies, dropped by 0.3% to 101.977, nearing seven-month lows.
Bearish Dollar Momentum Building
Analysts predict that the upcoming events, such as the Fed minutes on Wednesday and Powell's speech on Friday, will drive currency movements for the week. They anticipate a dovish tone, with the dollar showing signs of bearish momentum. Traders are closely monitoring the dollar's performance, expecting further declines leading into September.
The Fed has kept interest rates steady since last July, but markets have priced in a rate cut for September, with a possibility of a 50 basis point move.
Sterling Reaches One-Month High
Meanwhile, the pound rose by 0.2% to 1.2963, hitting a one-month high against the dollar. Analysts believe that the sterling's strength is due to the dollar's weakness in global markets. They also note that merger and acquisition activities in the UK are contributing to the demand for sterling.
The euro also edged higher to 1.1037, approaching last week's seven-month high. Analysts suggest that if the EUR/USD pair crosses 1.11, it could continue to rise due to low volatility in the market.
Yen Surges Higher
On the other hand, the yen fell by 1% to 146.05 against the dollar, driven by dollar weakness and potential policy differences between the U.S. and Japan. The yuan also climbed by 0.3% to 7.1408, benefiting from broad dollar selling as investors anticipate U.S. rate cuts.
Analysis:
The recent decline in the U.S. dollar is attributed to market expectations of a dovish stance from the Federal Reserve. This has led to a rise in other major currencies like the pound and the euro. Traders are closely watching upcoming events and speeches by Fed officials for further insights into future rate cuts. The potential for a weaker dollar has also fueled gains in the yen and the yuan, as investors bet on U.S. monetary policy easing. Overall, these currency movements can impact global markets and trade relations, making it crucial for investors to stay informed and adapt their strategies accordingly.