DXY: Dollar Index Slides to Year Low as Fed Minutes Float September Rate Cut

Euro powered higher against the buck, almost hitting $1.12. The Japanese yen and the sterling also made gains early Thursday.

• The US dollar index DXY dropped to its lowest level of the year, making way for rival currencies to move into the spotlight and realize some gains. The greenback’s index slipped under 101 against a basket of six currencies and bottomed out at 100.90. It was a bad Wednesday to be holding the dollar — the Federal Reserve released its minutes from the meeting three weeks ago, indicating that a rate cut is likely coming in September.
• The dollar has been in a steady downfall over the past two months. After a peak at more than 106 in late June, a steep drop has erased roughly 5% of the buck’s valuation against its peers. Just take a look at the forex board — the EUR/USD is happily treading the chart toward $1.12 after four straight days of winning. The GBP/USD is on its way to $1.31. Both currency pairs boast 2024 highs at current market prices. The USD/JPY dropped to 145.
• What’s behind the dollar’s fall? Interest rate expectations. With lower rates, comes a lower dollar. Generally, when borrowing costs go down, they take with them the value of the local currency as it yields less on deposits and becomes an unattractive place for businesses and consumers to park their cash. Instead, they start looking for alternatives in stocks, commodities or competing currencies.