By Rae Wee
SINGAPORE - The U.S. dollar saw a broad decline on Monday, particularly against the yen, as investors speculated on a dovish tone in the upcoming Federal Reserve's July policy meeting minutes and Chair Jerome Powell's speech at Jackson Hole.
The currency movements for the week will be heavily influenced by the release of the Fed's minutes on Wednesday and Powell's speech on Friday. Additionally, inflation data from Canada and Japan, alongside Purchasing Managers' Index readings across the U.S., euro zone, and UK, will also play a role.
The greenback fell over 0.8% against the yen, dropping to 146.37 from a two-week high of 149.40 last week. Analysts attributed this sharp decline to overall dollar weakness.
Market turbulence in early August, triggered by the Bank of Japan's hawkish tilt last month, was further exacerbated by softer-than-expected U.S. economic data. This led to fears of a recession in the U.S., prompting investors to question the Fed's rate easing strategy.
As concerns eased, the yen weakened, and Japanese investment data confirmed that investors were betting on a slow pace of rate rises by the BOJ and a cheap yen.
Other currencies also saw movement, with the euro approaching a seven-month high against the dollar and sterling rising to a one-month high. The dollar, on the other hand, lost ground against a basket of currencies.
Traders have fully priced in a 25-basis-point rate cut by the Fed in September, with futures indicating over 90 bps worth of easing by year-end.
Looking ahead, all eyes are on Powell's speech at the end of the week, with expectations of a rate cut in September. The New Zealand dollar and Australian dollar also saw gains on expectations of a dovish Fed outcome.
Overall, the market is anticipating further monetary policy easing by the Fed, with potential implications for global currency movements and investor sentiment.