Investing.com – The U.S. dollar rose Monday, climbing away from the one-year low seen last week, while disappointing economic activity data weighed on the euro. 

At 04:15 ET (08:15 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.5% higher to 100.925, just above a 12-month low.

Dollar looks to PCE release 

The U.S. dollar has recovered to a degree from the selloff in the wake of the hefty rate cut last week, with traders now appearing to write off the chance of a US recession.

“So far investors have bought into the soft landing narrative offered by Chair Jerome Powell last week,” said analysts at ING, in a note. “And instead of the 50bp rate cut spooking equity markets, key benchmarks have continued to push higher.”

That said, Fed futures traders are now pricing in 75 bps in rate cuts by the end of this year, and nearly 200 bps in cuts by December 2025, according to CME FedWatch.

The major economic data release this week is due on Friday, in the form of the Fed’s preferred inflation gauge, . 

Analysts expect a 0.2% month-on-month rise taking the annual pace to 2.7%, while the headline index is seen slowing to just 2.3%.

“A 0.1% core PCE on Friday could potentially trigger another leg lower in US rates and the dollar,” ING added.

Euro hit by PMI data

In Europe, traded 0.5% lower to 1.1111, after data showed that German business activity contracted in September at its sharpest pace in seven months, suggesting Europe’s largest economy had tipped into recession.

The , compiled by S&P Global, fell to 47.2 from 48.4 in August, below the 48.2 forecast.

The cut rates for the second time this year earlier this month last week, and further signs of economic weakness could lift the chances of another rate cut in October.

“This is not a great environment for the euro, nor for EUR/USD to push above major resistance at 1.12. Further EUR/USD consolidation in a 1.11-1.12 range seems likely, with downside risks early this week,” said ING.

fell 0.4% to 1.3264, handing back some of the pair’s recent gains after last week hitting its highest level since March 2022.

The held its key interest rate at 5% on Thursday, after kicking off its easing with a 25-bp reduction in August.

“There is a sense that long sterling positioning is quite extreme,” said ING. “Yet the latest CFTC data published last Friday and covering activity to last Tuesday (17 September) actually showed quite a large reduction in sterling longs from the speculative community.”

Yuan slips slightly after PBOC cut

traded 0.1% higher to 7.0595, with the yuan slipping after the People’s Bank of China trimmed its 14-day repo rate to further loosen monetary conditions and support economic growth.

fell 0.1% to 143.72, with regional trading volumes muted on account of a Japanese market holiday, although the yen remains close to its strongest levels for 2024. 

The held interest rates steady last week, and said it expected inflation and economic growth to steadily increase.

By Chibuike Oguh and Linda Pasquini

NEW YORK/LONDON (Reuters) -The dollar strengthened against the yen on Friday, hitting its highest level in two weeks, after the Bank of Japan left interest rates unchanged and indicated that it was not in a hurry to hike them again.

The BOJ could afford to spend time eyeing the fallout from global economic uncertainties, Governor Kazuo Ueda said in a press conference following the central bank’s move, adding that its monetary policy decision will be based on “economic, price and financial developments.” The BOJ kept rates steady at 0.25%, a move that was widely expected.

The dollar rose as high as 144.50 yen, reaching its highest level since early September. It was last up 0.92% at 143.92. The euro also strengthened against the yen, gaining 0.93% to 160.59.

“We’re seeing a little bit of consolidation in markets that got the dollar-yen move, which has been quite significant in the past few days since the Fed,” said Shaun Osborne, chief FX strategist at Scotiabank in Toronto, referring to the Federal Reserve’s decision on Wednesday to cut interest rates by half a percentage point.

“The statement sounded perhaps a little bit more cautious than markets would have liked given the assumption that we will see another rate cut from the Bank of Japan before Christmas. I still think that’s likely.”

The dollar has traded in a choppy fashion since the Fed kicked off its monetary policy easing cycle.

Against the dollar, however, the euro weakened 0.01% to $1.115925. The , which measures the greenback against major currencies, gained slightly to 100.75 and just above a one-year low.

“There’s a sense in the market that the Bank of Japan doesn’t need to hike rates and also we’re turning more to the political situation in Japan,” said Adam Button, chief currency analyst at ForexLive in Toronto.

Markets imply nearly a 49% chance the Fed will deliver another 50-basis-point rate cut in November and have priced in 74.8 bps of cuts by the end of this year. The Fed’s policy rate is expected by the end of 2025 to be at 2.85%, which is now thought to be the Fed’s estimate of the neutral rate.

That dovish outlook has bolstered hopes for continued U.S. economic growth and sparked a major rally in risk assets. Currencies leveraged to global growth and commodity prices also benefited, with the Australian dollar reaching as high as $0.68285. It was last down 0.13% to $0.68060.

“It runs counter-intuitive to what we’ve seen in the market, with a big cut from the Fed and the Bank of Japan holding rates. I think that the message really from dollar-yen is that the market is feeling better about global growth,” Button said.

China unexpectedly left benchmark lending rates unchanged at the monthly fixing on Friday. Beijing has been hinting at other stimulus measures, enabled in part by the Fed’s aggressive easing that shoved the dollar to a 16-month low against the yuan.

Major Chinese state-owned banks were seen buying dollars in the onshore spot foreign exchange market on Friday to prevent the yuan from appreciating too fast, two people with knowledge of the matter said. The dollar weakened 0.23% to 7.043 versus the offshore .

The Bank of England kept rates unchanged on Thursday, with its governor saying the central bank had to be “careful not to cut too fast or by too much.”

The pound was up 0.24% at $1.33180, supported by the release on Friday of strong British retail sales data.

Currency bid prices at 20              

September​ 06:46 p.m. GMT

Description RIC Last U.S. Close Previous Session Pct Change YTD Pct High Bid Low Bid

Dollar index 100.74 100.67 0.07% -0.62% 101.01 100.41

Euro/Dollar 1.1162 1.1162 -0.01% 1.11% $1.1181 $1.1136

Dollar/Yen 143.84 142.62 0.9% 2.03% 144.485 141.84

Euro/Yen 1.1162​ 159.19 0.85% 3.16% 161.15 158.43

Dollar/Swiss 0.8506 0.8478 0.35% 1.09% 0.8516 0.8453

Sterling/Dollar 1.3314 1.3286 0.22% 4.63% $1.3341 $1.3269​

Dollar/Canadian 1.356 1.3557 0.04% 2.31% 1.359 1.3543

Aussie/Dollar 0.6806 0.6815 -0.13% -0.18% $0.6829 $0.6784

Euro/Swiss 0.9494 0.9462 0.34% 2.22% 0.9503 0.9447

Euro/Sterling 0.838 0.8401 -0.25% -3.32% 0.8407 0.8382

NZ Dollar/Dollar 0.6237 0.6242 -0.06% -1.29% $0.6258 0.621

Dollar/Norway 10.4989​ 10.4814 0.17% 3.59% 10.561 10.4482

Euro/Norway 11.7197 11.699 0.18% 4.42% 11.7702 11.681

Dollar/Sweden 10.1778 10.1512 0.26% 1.1% 10.2309 10.138

Euro/Sweden 11.3604 11.338 0.2% 2.11% 11.3988 11.3326