The U.S. currency also dropped below the closely watched 145 yen level and remained near the more-than-one-year low to sterling reached overnight
The dollar slid to its lowest level this year versus the euro on Wednesday as traders braced for potentially crucial revisions to U.S. payrolls data later in the day, ahead of a speech by Fed Chair Jerome Powell at the end of the week.
The U.S. currency also dropped below the closely watched 145 yen level and remained near the more-than-one-year low to sterling reached overnight.
Pressure notably came from U.S. bond yields, which reached their lowest since August 5, when yields slumped to a more-than-one-year low after surprisingly soft monthly jobs figures sparked recession fear.
The reduced yield premium in the U.S. Treasury market has been a clear factor driving the USD down, said Chris Weston, head of research at Pepperstone.
As we can see in so many USD pairs of late, the USD just cannot find a friend in the market and is in free fall, Weston added.
A weak monthly payrolls report at the start of this month was a catalyst for a rise in volatility across asset classes, leaving market participants bracing for another potential shock with revised data due later Wednesday.
The August 2 payrolls report sent traders racing to price in prospects of the Federal Reserve needing to cut interest rates by a half percentage point at its mid-September policy meeting, pushing the implied probability of such a move to nearly 71%, as per CME Group’s FedWatch Tool.
However, a run of better macroeconomic data has since seen the odds flip, with bets now 72% for a quarter-point reduction and 28% for the bigger cut.
Powell’s keynote address on Friday at the Jackson Hole economic symposium will be watched carefully for any hints on the likely size of a rate cut next month, and whether borrowing costs are likely to be cut at each subsequent Fed meeting.
The U.S. dollar index declined to its lowest since January 2 at 101.30 before recovering to 101.48 as of 0450 GMT. It had dropped 0.5% or more in each of the previous three sessions.
The euro rose to $1.1132, the highest since December 28, before declining to $1.1118.
Sterling stood at $1.3027, 0.05% weaker from Tuesday when it hit a high of $1.3054, a level last seen in July of last year.
