Dollar Falls as Rate Hike Bets Fade Amid Softer Economic Data

The US dollar index fell to its lowest level in over two months as traders reassessed their bets on further rate hikes by the Federal Reserve.

This shift comes against a backdrop of softer economic data, which has led markets to conclude that the urgency for further interest rate increases has diminished.

According to the CME FedWatch tool, there is now only a 30.8% chance of a rate hike at the Fed's September meeting, down from 52.2% just a week ago.

The dollar fell against major currencies, with the euro rising 0.3% to around US$1.1614, its highest level in two months. The yen also strengthened by 0.2%, reaching around 159.04 per dollar.

Analysts point out that the joint efforts of the US and Japan to stem the slide in the yen have set up a delicate backdrop for currency markets, with the focus now shifting to whether the Bank of Japan will raise rates soon.