Dollar Falls to More Than Two-Month Low as Euro Strengthens

The US dollar fell to its lowest level in more than two months on Monday, as a series of weak economic data reduced investor expectations for a Federal Reserve interest rate hike.

The dollar index, which measures the US currency against a basket of major currencies, fell to its lowest level since early June. At the same time, the euro strengthened by 0.3% and reached approximately $1.1614, its highest level in the past two months.

The yen also strengthened — its rate against the dollar increased by 0.2%, reaching approximately 159.04 yen. The yen's appreciation was recorded despite Japan's weaker-than-expected economic growth data. The currency remains above the four-year low recorded at the end of July, after which the governments of Japan and the US conducted a joint currency intervention to prevent yen weakening.

Market attention is now focused on the Fed's Jackson Hole Symposium, which will take place next week. Investors will particularly pay attention to central bank officials' assessments of recent economic data and the future direction of interest rates.

Furthermore, the joint currency intervention by the US and Japan had a significant impact on the foreign exchange market. Now the main question is whether Japan's central bank will take steps toward a rate hike in the near term.

According to Matthew Tuttle, head of Tuttle Capital Management, the intervention changed the direction of the yen's exchange rate, but did not eliminate the stimulus for the so-called carry trade caused by the difference between interest rates.

Carry trade involves borrowing cheaply in a currency with low interest rates, such as the yen, and investing the proceeds in assets with higher returns.