Dollar Hits Three-Month Lows Amid Fed Rate Cut Expectations

The US dollar has fallen to three-month lows against a basket of major currencies, extending its weekly decline. The dollar index, which measures the greenback's value against six key peers, slipped to its weakest level since early February at 104.20, down 0.3% from last week's close.

This downturn is largely driven by growing expectations that the Federal Reserve may start cutting interest rates sooner than previously anticipated, following a slowdown in US economic data. The probability of a rate cut by September has risen to 70%, according to CME FedWatch, up from 50% just a month ago.

The Japanese yen has stabilized after suspected intervention by Tokyo authorities last week. Traders and analysts widely believe that Japan intervened to support the yen, which had hit a 34-year low of 160.2 against the dollar. The yen's recovery halted its slide at around 156.2 per dollar.

A weaker dollar can have far-reaching implications for global markets, making US exports more competitive but also fueling inflation by raising import costs. For Japan, a stable yen is crucial in containing import-driven inflation and easing pressure on households and businesses.