Dollar Slumps as Rate Hike Bets Diminish Amid Softer Economic Data

The dollar fell to its lowest level in over two months on Monday as traders reduced their bets on a US rate hike, driven by softer economic data. This led to a strengthening of the yen and the euro reaching a two-month high.

The dollar index, which measures the value of the dollar against a basket of major currencies, fell to its lowest since early June. The yen rose 0.2% to around 159.04 per dollar, rebounding from four-decade lows hit in late July after intervention by Japanese and US authorities.

Matthew Tuttle, CEO of Tuttle Capital Management, noted that the intervention changed the path of currency markets but did not eliminate the interest-rate incentive supporting carry trades. Carry trades involve borrowing cheaply in a low-interest-rate currency like the yen to chase higher returns elsewhere.