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The dollar extended its losses against other major currencies on Thursday, a day after a report showed that US inflation was not as high as expected, prompting traders to lower expectations of interest rate hikes. interest from the Federal Reserve in the future.
Investors cut bets on the possibility of the Fed raising rates by 75 basis points for a third straight time when it meets in September, after a report on Wednesday showed US consumer prices were flat in July.
Fed funds futures traders now see a 66% chance of a 50 point rise in September and a 34% chance of a 75.
This sent stocks higher and the dollar generally lower as traders readjusted their forecasts to take into account the possibility that inflation, which is at multi-decade highs, may have peaked.
“Risk appetite has picked up across the financial landscape on the prospect of less restrictive monetary policy from the Federal Reserve,” said Karl Schamotta, chief market strategist at Corpay.
The dollar index fell 0.257% to 104.95 points, after falling 1% the day before, its biggest daily drop in five months.
The euro and the yen were some of the currencies that benefited from the weakness of the dollar and both extended their gains from the previous day. The euro was up 0.34% at $1.03345.
The Japanese yen was up 0.22% at 132.59, after rising more than 1% on Wednesday.
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