The U.S. dollar weakened to its lowest level since late July on Monday as investors turned their attention to a crucial slate of labor market data expected later this week. Traders are closely watching job openings, private payroll figures, and Friday’s nonfarm payrolls report, all of which could shape expectations for the Federal Reserve’s next interest rate move.
The dollar index slipped 0.22% to 97.64 after touching 97.55, its lowest mark since July 28, with the greenback registering a 2.2% monthly decline in August. Analysts said the U.S. economy is no longer significantly outperforming global peers, a factor that is helping justify a softer dollar. Market pricing currently reflects about a 90% chance of a 25-basis-point Fed rate cut in September and up to 100 basis points of easing through 2026.
Meanwhile, broader political and policy risks are adding pressure on the U.S. currency. Investors are weighing the impact of a recent court ruling against former President Donald Trump’s tariffs, as well as Trump’s escalating dispute with the Federal Reserve over his attempt to fire Governor Lisa Cook. Concerns about Fed independence and “fiscal dominance,” where monetary policy becomes pressured by political agendas, have also cast a shadow over the greenback.
Elsewhere, the euro strengthened 0.35% to $1.1724, and sterling edged 0.18% higher to $1.3528. The yen held steady around 147.00 after the dollar suffered a 2.5% decline against it in August. In Asia, the Chinese yuan traded near a 10-month high, supported by stronger central bank fixings and a buoyant domestic stock market despite persistent concerns about the pace of China’s economic recovery.
Global investors remain cautious ahead of the U.S. data, with analysts noting that strong labor numbers could dampen expectations for aggressive Fed easing, while further signs of weakness would bolster the case for additional cuts. The outcome of this week’s reports is expected to set the tone for currency markets in September.
