Bear Dollar Boosting Momentum; Sterling hits one-month high by Investing.com

Investing.com – The U.S. dollar fell on Monday ahead of the release of minutes from the Federal Reserve’s policy meeting in July and incoming chairman Jerome Powell’s speech in Jackson Hole later this week.

At 05:40 ET (09:40 GMT), the dollar index, which tracks the greenback against a basket of six other currencies, traded 0.3 percent lower at 101,977, falling near seven-month lows.

Bearish dollar momentum is starting to build

due on Wednesday, and Powell’s on Friday are likely to be the main drivers of the currency’s movement during the week, with traders expecting a dovish tone to emerge.

“The signs are subtle, but bearish dollar momentum is starting to build,” analysts at ING said in a note. “DXY is now falling through the lows seen in early August. Events this week such as the July FOMC minutes, wage revisions and Federal Reserve speakers could contribute to the dollar’s losses. Investors may want to see how much lower they can push the dollar in September.”

The Fed has kept its benchmark overnight interest rate in the current range of 5.25%-5.50% since last July after raising its policy rate by 525 basis points from 2022.

Traders have fully priced in a 25 basis point rate cut from the Fed in September, with a 24.5% chance of a 50 basis point move.

Sterling rises to a one-month high

In Europe, it traded 0.2% higher at 1.2963, climbing to a one-month high, as sterling benefited from dollar weakness.

“GBP/USD looks set for a retest of the year’s high at 1.3045 as general dollar weakness dominates global FX markets,” analysts at ING said. “We thought the BoE’s hawkishness could keep sterling gains under control. That’s what BoE Governor Andrew Bailey is talking about at the Fed’s Jackson Hole symposium on Friday.

“What we may be underestimating, however, is the demand for sterling that comes through M&A activity. The UK is this year the target region for transactions worth over $200 billion.”

traded 0.1% higher at 1.1037, hitting a more than seven-month high since last week.

“Should EUR/USD start trading up to 1.11, we would not underestimate its ability to continue, given that realized volatility has been so low for so long,” ING added.

Yen rises higher

In Asia, it was down 1% at 146.05, with the big move down to broad dollar weakness along with the potential for further policy divergence between the US and Japan.

Bank of Japan Governor Kazuo Ueda is due to appear in parliament on Friday to discuss the central bank’s decision to raise interest rates last month.

fell 0.3 percent to 7.1408, with the yuan heading for its strongest gain in two weeks, riding a wave of broad dollar selling as investors bet on a U.S. interest rate cut.