The U.S. dollar hit a 7-month low, sharply falling against the euro and yen, amid economic data signaling a potential downturn.
The dollar index fell 0.7% to 102.39, hitting 102.15 earlier, its lowest since January 12.
The euro rose 0.5% to $1.0968, peaking at $1.1009, while the dollar fell 2.3% to 143.13 against the yen.
Weaker U.S. jobs data, disappointing tech earnings, and concerns over China’s economy triggered a global sell-off in stocks, oil, and currencies.
On Monday, selling persisted: U.S. Treasury yields dropped, stock indexes fell, bitcoin slumped, and the dollar weakened.
“As traders continue to pile into bets that the Fed is going to ease a very large amount more this year than thought even as recently as Wednesday, USD is taking a bit of a beating with a couple notable exceptions,” Helen Given, FX trader at Monex USA in Washington, said.
“Friday’s NFP report was a bit of a shock to the global system and markets are very worried that the US may no longer be a viable driver of global growth,” she said.
Since last week, treasury yields have sharply fallen as the Fed held rates steady and Powell hinted at a September cut.
However, by Friday, data showing a rise in unemployment increased expectations for rate cuts.
The Japanese yen’s surge follows traders unwinding carry trades, where low-interest loans from Japan funded higher-yield investments.
On Monday, Fed fund futures indicated a nearly 100% chance of a 50-basis-point cut in September, with LSEG data suggesting 127 basis points of cuts this year.
“The Japanese equity selloff during Asian trading spooked markets in a big way, coupled with the Yen’s resurgence, and we may be seeing the so-called ‘panic spiral’ that many have been concerned about,” Monex’s Given said.
Meanwhile, the Swiss franc, a safe haven, rose 1% to 0.8499 per dollar, reaching a seven-month high.
“(It) all seems a significant over-reaction to one weak jobs report, particularly when we know that the FOMC shan’t over react from a policy perspective,” Michael Brown, market analyst at Pepperstone in London, said.
The dollar gained some relief against the British pound as weakening global investor sentiment reduced demand for riskier currencies.
On Monday, Mexico’s peso depreciated for a third day, with the U.S. dollar rising 1.9% to 19.53 pesos due to investor risk aversion.
On Monday, Bitcoin and Ether plunged to multi-month lows as investors fled risky assets. Bitcoin fell 14%, while Ether dropped 21%.
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