Dollar Tumbles to Fresh Lows Amid Fed Dovishness and JPY Intervention

The US dollar continued its slide after the Federal Reserve's (Fed) recent dovish surprise, compounded by Japanese yen intervention ahead of this morning's Bank of Japan announcement. The dollar index (DXY), where the yen carries a significant 13.6% weight, briefly dipped below 100 and reached its lowest level since June 17. Position-squaring likely amplified the move.

The Fed's preferred inflation gauge, personal consumption expenditures price index (PCE), rose only 0.1% month-on-month in June, while Q2 growth undershot expectations at 1.5% quarter-on-quarter annualised. Adding to the pressure was JPY intervention, which triggered a more than 3% decline in USD/JPY and spilled over into broader dollar sentiment.

However, it may be too early to call a bottom in this dollar selloff just yet. Any disappointment in US data should lead to a larger dovish repricing, particularly if oil prices come under renewed pressure. Fedspeak will also be crucial, with off-meeting remarks from individual Fed members likely to receive greater scrutiny as markets assess voting intentions ahead of the next meeting.