Dollar Dives on Rate Cut Bets

5 Sep 2024 , 09:37 AM

The dollar fell on Thursday as traders increased their bets on a big rate decrease from the Federal Reserve later this month, with the yen outperforming on safe-haven demand as concerns about the US economy’s growth outlook reappeared.

Global markets have been on edge, with stocks in particular taking a beating, after softer-than-expected U.S. data released this week reignited concerns that the world’s largest economy’s growth outlook was less rosy than previously thought and that the labour market could slow more sharply than expected.

Investors have fled hazardous assets in search of safety, with the yen benefiting the most.

The Japanese yen was last trading 0.26% higher at 143.56 per dollar, having gained nearly 2% this week.

The Swiss franc, a traditional safe-haven currency, remained stable at 0.8461 per dollar, albeit its 0.46% increase this week was less than the yen’s.

Data released on Wednesday revealed that U.S. job vacancies fell to a three-and-a-half-year low in July, indicating that the labour market was losing momentum. The figures came following Tuesday’s ISM manufacturing survey, which stayed in contraction zone.

Given the Fed’s emphasis on maintaining the US employment market, investors have recently placed a higher value on any data linked to its health.

The US dollar stayed on the back foot in early Asian trade, while the euro held firm at $1.1083. Sterling was barely changed, trading at $1.3147.

Against a basket of currencies, the dollar slipped slightly to 101.25.

According to the CME FedWatch tool, traders are now pricing in a 44% possibility of an outsized 50-basis-point rate decrease when the Fed meets later this month, up from 38% last week.

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