Fed Pressure Eases; Dollar Enters Correction Phase
The US dollar weakened during Friday's trading (August 14) after subdued US inflation data caused markets to further scale back expectations for a Federal Reserve interest rate hike. The Bloomberg Dollar Spot Index fell by approximately 0.2%, while the DXY remained below the psychological 100 level. Markets now price in only a roughly 35% chance of a Fed rate hike in September.
The euro was among the currencies benefiting from the dollar's weakness; the EUR/USD pair rose about 0.2% to 1.1552. The British pound also strengthened by around 0.2% to 1.3516, supported by stronger UK economic growth data and reduced expectations for Fed policy tightening.
The New Zealand dollar also strengthened, with NZD/USD rising approximately 0.44% to 0.5876. The "Kiwi" recovered after previously facing pressure from low domestic inflation expectations, even as markets continue to anticipate an 85% probability of a Reserve Bank of New Zealand rate hike in September. The Australian dollar hovered around 0.7060 after the RBA kept the door open for further rate hikes should inflation risks re-emerge.
The Japanese yen also strengthened slightly, pushing USD/JPY down toward the 159 level, though the currency still posted a weekly loss of about 0.9%. The 160 level remains a focal point, as markets view it as a zone that could trigger renewed intervention. Speculation that the Bank of Japan might raise interest rates in September provided some support to the yen.
Meanwhile, the Norwegian krone was among the top gainers against the dollar, bolstered by a rebound in oil prices; Brent crude strengthened back toward US$88 per barrel. Conversely, the Swiss franc lagged behind and weakened against the euro, with EUR/CHF approaching 0.94—its highest level since August 2025.
Newsmaker Analysis: The current dollar weakness stems primarily from a combination of relatively cool US CPI and PPI data and the diminishing likelihood of a Fed rate hike in September. These conditions create room for the euro, pound, Kiwi, and commodity currencies to strengthen. However, the rise in the 10-year US Treasury yield to around 4.65%–4.66% and geopolitical risks surrounding Iran continue to limit the dollar's decline. Attention now shifts to US retail sales; weak consumption data could prolong pressure on the dollar, whereas strong results could potentially trigger a rebound in the DXY. (arl)
Source: Newsmaker.id
