Dollar Index Retreats Amid Reduced Fed Hike Bets, Yen Surges Against Greenback

The US dollar index retreated after markets reduced expectations of a Fed rate hike following a weaker-than-expected ADP report and dovish comments from Fed Governor Waller. The ADP report showed 38,000 job additions in August, less than the market estimate of 47,000.

Fed Governor Waller stated that he supports holding the policy rate at the current level if inflation continues to progress towards the 2% target. As a result, the probability of a September rate hike has dropped to around 50% from around 70% last week.

The yen surged against the US dollar, falling to the 155-156 range due to intervention risk by Japanese authorities and rising bets for faster monetary policy normalization by the BoJ. Markets are also pricing in rate hikes in September and October.