The dollar index (DXY00) Monday fell by -0.52% and posted a 6-3/4 month low. The dollar Monday extended last Friday’s selloff on concern the Fed is behind the curve with policy support for a slowing US economy. Swap markets have now priced in a 100% chance the Fed will cut interest rates by 50 bp at the September 17-18 FOMC meeting, a bearish factor for the dollar. Also, Monday’s slump in the 10-year T-note yield to a 13-1/2 month low has weakened the dollar’s interest rate differentials. In addition, Monday’s surge in the yen is weighing on the dollar as the yen soared to a 7-month high today against the dollar.
The dollar recovered from its worst levels Monday after the US Jul ISM services index rose more than expected. Also, Chicago Fed President Goolsbee's comments supported the dollar when he said US economic growth continues at a "fairly steady level."
