The U.S. dollar weakened against the euro and Swiss franc as traders reduced expectations for Federal Reserve interest rate hikes.
The U.S. dollar edged lower against the euro and the Swiss franc on Monday as traders trimmed rate hike bets following softer U.S. economic data. Kit Juckes, chief FX strategist at Societe Generale, noted that underwhelming data, including falling retail sales and unexpected job losses, is causing markets to reprice expectations regarding the Federal Reserve's policy tightening. According to the CME FedWatch tool, the probability of a rate increase at the September meeting dropped to 30.6% from 52.2% a week ago. The dollar index remained relatively flat after hitting its lowest point since early June. Meanwhile, the yen pared early gains despite weaker-than-expected Japanese economic growth data, as markets focus on whether the Bank of Japan will raise rates soon. China's industrial output growth slowed while retail sales grew less than expected in July. The Australian dollar strengthened against the greenback, while the dollar weakened slightly against the offshore Chinese yuan.