US.Dollar Index Slips as Markets Bet on Fed Rate Cuts: Weekly Analysis
St. Louis, MO (STL.News) US Dollar Index – The US Dollar Index (DXY) posted a modest but notable decline over the past week, as investor sentiment shifted toward the expectation of interest rate cuts by the Federal Reserve. Despite brief moments of resilience following stronger-than-expected economic data, downward pressure persisted, leaving the greenback near its lowest levels in weeks.
Weekly Performance Overview
From Friday, August 8, to Friday, August 15, 2025, the US Dollar Index (DXY) fell by approximately 0.4%, continuing a broader cooling trend that began in late July. The index opened the week near 98.5, hovered close to 99 in early sessions, and slid to approximately 97.9 by Friday’s close.
Intraday trading revealed a narrow but steady decline rather than a single sharp drop, reflecting a consistent easing of demand for the dollar in currency markets.
US Dollar Index – Key Drivers Behind the Dollar’s Decline
1. Federal Reserve Outlook
The largest factor weighing on the dollar this week was a growing belief among traders and analysts that the Fed is preparing to cut interest rates in September. While the market still debates whether the cut will be 25 or 50 basis points, the consensus is leaning toward a smaller adjustment, which nonetheless reduces the yield advantage that has supported the dollar in recent years.
Lower interest rates typically weaken the dollar because they make U.S. assets less attractive to global investors. This shift in monetary policy expectations has caused many currency traders to reduce long-dollar positions.
2. Inflation and Economic Data
Economic releases painted a mixed picture. The week began with Producer Price Index (PPI) data that came in slightly hotter than anticipated, accompanied by jobless claims numbers indicating ongoing labor market resilience.
Initially, these figures lent some short-term support to the greenback, as they suggested the economy still had momentum. However, the inflation data wasn’t enough to change the broader outlook—markets still expect inflation to gradually moderate, giving the Fed room to ease policy without sparking a surge in prices.
3. Shifts in Risk Appetite
A rebound in global equities mid-week also played a role. Strong earnings in the technology sector and easing concerns over corporate debt defaults encouraged investors to shift toward riskier assets, reducing the demand for the dollar as a safe haven.
Currencies such as the British pound, the euro, and some emerging market units gained ground against the dollar, aided by regional economic optimism and expectations of policy stability abroad.
US Dollar Index – Day-by-Day Recap
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