The US dollar dropped to a three-week low on Monday as data revealed a slowing economy with lower-than-anticipated manufacturing and construction spending figures.
According to Reuters, this downturn suggests that the Federal Reserve might be on track to reduce interest rates later this year.
US Dollar Hits Three-Week Low
The dollar index, which measures the value of US currency against six major currencies, dropped 0.4% to 104.14. The lowest index since mid-May is 104.13.
The greenback also fell to a two-week low against the yen, down 0.7% at 156.22. On the other hand, the euro gained 0.5% against the dollar, hitting $1.0897, following a rise to a three-week high of $1.0898.
The US Institute for Supply Management's (ISM) purchasing managers index (PMI) for manufacturing dipped to 48.7 in May from 49.2 in April.
That marks a decline from March's 18-month high of 50.3. According to a research note from BMO, the US manufacturing sector slid to 18 of the last 19 months.
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US Construction Spending Falls
US construction spending also decreased for two consecutive months in April, falling by 0.1% after a 0.2% dip in March. Reductions in non-residential activity drove this decline.
Investors are now skeptical about the sustainability of the country's economic outperformance, with markets increasingly betting on a potential rate cut by September.
Shifting expectations regarding the Federal Reserve's future rate cuts have weighed down the dollar's value. The US dollar saw its first monthly drop of the year in May.
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