Dollar Weakens Amid Reduced Rate Hike Expectations

The US dollar has lost strength against major currencies due to reduced expectations of near-term rate hikes by the Federal Reserve. Traders now expect a 35% chance of a rate increase at the Fed's September meeting, down from 52% last week.

The euro has eased back from two-month highs of $1.161 touched on Monday and is currently trading at $1.157. The Japanese yen was a touch weaker at 159.70 per dollar, having erased nearly half of the gains from joint US-Japan intervention in late July to lift the fragile yen away from a 40-year low.

Concerns about inflation stemming from the Middle East war and increased fiscal pressures have led bond traders to focus on longer-term borrowing costs for major Western economies. These costs are at their highest levels in decades, with long-term US Treasury yields rising to their highest level since 2007.