Dollar Softness Continues Amid Reduced Rate Hike Expectations

The US Dollar has been trading on a softer footing due to reduced expectations of Federal Reserve rate hikes, says MUFG's Lee Hardman.

The decline in short-term US yields is providing a headwind for the dollar performance this month, but it hasn't yet triggered another leg lower. The dollar index remains above its 200-day moving average at around 99.200.

Fed rate hike expectations were scaled back following weaker labor data and a mixed United States Producer Price Index report. This has provided more leeway for the Fed to leave rates on hold, with less weight placed on the upside inflation surprise in July.