The euro fell versus the dollar after inflation data from Germany and Spain led investors to increase their bets on the European Central Bank interest rate easing cycle. Inflation fell in six important German states in August, suggesting that national inflation could decline noticeably this month, while dropping to its slowest pace in a year in Spain.
The single currency was down 0.2% to $1.1098 after hitting $1.1072, having traded at $1.1128 before the German figures. It reached a 13-month high on Friday at $1.1201.
Money markets priced in 67 basis points of ECB rate cuts in 2024, from around 63 bps before the data.
In the broader market, the dollar rose after the German data, after bouncing on Wednesday.
The greenback has fallen some 2.9% for the month thus far, putting it on track for its steepest monthly decline in nine months.
Investor bets for imminent U.S. rate cuts were further cemented by Fed Chair Jerome Powell's remarks at Jackson Hole last week that the "time has come" to cut rates, joining a chorus of Fed policymakers.
Markets have fully priced in a 25 basis point rate cut from the Fed next month, with an around 35% chance of an outsized 50 bp reduction, according to the CME FedWatch tool.
The dollar index was last 0.16% higher at 101.18, still within striking distance of a 13-month low of 100.51 on Tuesday.
Federal Reserve Bank of Atlanta President Raphael Bostic on Wednesday said it may be "time to move" on rate cuts, but he wanted to be sure before pulling that trigger.
The yen was little changed at 144.53 per dollar and was eyeing a 3.7% gain for the month.
Japanese investors were net buyers of foreign bonds in the week to Aug. 24.
Policymakers at the Bank of Japan (BOJ) have signalled that the central bank would continue to raise interest rates if inflation stayed on course.
Source : Reuters
