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The U.S. dollar experienced a broad decline on Monday, with a particularly sharp drop against the Japanese yen, as investors anticipated a dovish tone in the Federal Reserve’s upcoming July policy meeting minutes and Chair Jerome Powell’s speech at the Jackson Hole Symposium.
The greenback fell over 1% to 146.01 yen, having briefly dipped below the 146 yen level. Analysts attributed this significant move to overall dollar weakness and the possibility of diverging monetary policies between the U.S. and Japan.
Investors are closely watching the Fed’s meeting minutes, set to be released on Wednesday, and Powell’s speech on Friday for clues about the central bank’s future rate policy. The week will also bring key economic data, including inflation figures from Canada and Japan, as well as Purchasing Managers’ Index (PMI) readings from the U.S., euro zone, and UK.
The Bank of Japan (BOJ) is also in focus, with Governor Kazuo Ueda expected to address parliament on Friday regarding the central bank’s recent decision to raise interest rates. The BOJ’s hawkish shift last month contributed to market turbulence, triggering a selloff in risk assets and sending stock markets, including Japan’s Nikkei, into a downturn.
Elsewhere, the euro edged closer to a seven-month high, trading at $1.1043, while sterling reached a one-month high of $1.2960. The dollar index, which measures the greenback against a basket of currencies, fell to a seven-month low of 102.11.
Market participants have fully priced in a 25-basis-point rate cut from the Fed in September, with a 24.5% chance of a 50 bp reduction. Futures suggest over 90 basis points of easing by the end of the year.
The Australian and New Zealand dollars also reached one-month highs, buoyed by improved risk sentiment and expectations of a dovish Fed outcome. The Australian dollar received additional support from reduced bets on imminent rate cuts after Reserve Bank of Australia Governor Michele Bullock stated it was too early to consider policy easing.
