Dollar Slumps to Six-Week Low
The US dollar weakened again on Wednesday (August 5) and remained below the psychological 100 level. The DXY traded in the 99.66–99.68 range, down around 0.2% and approaching a six-week low. The decline came after disappointing US labor-market data, while hopes for the reopening of the Strait of Hormuz reduced demand for the dollar as a safe-haven asset.
ADP data showed that US private-sector employers added only 44,000 jobs in July, well below the forecast of 70,000 and slowing from June’s downwardly revised figure of 95,000. The ISM Services PMI remained in expansion territory at 54.1, but its employment component fell to 47.4. The signs of a cooling labor market prompted markets to reduce the probability of a Federal Reserve rate hike in September to slightly below 60%.
However, the dollar avoided a deeper decline as inflationary pressure in the services sector remained elevated. The ISM Prices Paid Index jumped to 70.3, indicating that business costs continued to rise. Fed officials have also kept the door open to further monetary tightening if inflation fails to move convincingly toward the 2% target.
Risk sentiment improved after Iran and Oman reported progress on arrangements for a shipping route through the Strait of Hormuz. The prospect of recovering energy flows pushed oil prices lower and eased inflation concerns. However, the proposed agreement would not automatically reopen the strait, and the remaining uncertainty discouraged traders from selling the dollar aggressively.
In the major currency market, EUR/USD traded around 1.1556, GBP/USD at 1.3485, and AUD/USD at 0.7063, supported by the weaker dollar and stronger demand for risk-sensitive currencies. Meanwhile, USD/JPY fell to around 157.41, with the yen retaining part of its gains following the joint US-Japan intervention.
Newsmaker Analysis: The DXY maintains a bearish bias while it remains below 100.00–100.20, with support at 99.50 and 99.20. EUR/USD could test 1.1600 as long as it holds above 1.1520, while GBP/USD may break through 1.3500–1.3550 if the dollar continues to weaken. AUD/USD could advance toward 0.7100, with support at 0.7020. For USD/JPY, a decline below 157.00 could open the way toward 156.00–155.20, while a move above 158.00 may revive concerns about further intervention. Friday’s NFP report will determine whether the dollar’s decline continues or reverses. (arl)
Source: Newsmaker.id
