Dollar Weakens as Rate Hike Expectations Fade

The US dollar index fell on Monday as traders scaled back expectations for a Federal Reserve rate hike this year. This move led to a strengthening of the yen against the dollar, with the currency gaining 0.2% to reach 159.075 yen.

Despite Japan's weaker-than-expected second-quarter GDP data, which showed an annualized expansion of 1.1%, the yen continued its upward momentum. This development was largely driven by the decline in expectations for a Fed rate hike, rather than the GDP numbers themselves.

The euro and British pound also saw gains, with the euro reaching a two-month high at $1.1585 and the British pound approaching its firmest levels since May. The Australian dollar and kiwi currency also rose to their strongest levels since June, with the Aussie gaining 0.3% and the kiwi advancing 0.4%.

Meanwhile, Japan's 10-year government bond yield jumped to a three-decade high, further supporting the yen's gains against the dollar. The US dollar index, which measures the greenback's strength against a basket of six currencies, fell by 0.1% and traded near its lowest levels of the month at 99.501.