The U.S. dollar is headed for its first monthly loss since December as easing inflation pressures strengthen expectations that the Federal Reserve will start dialing back interest rates before the year ends.
The Bloomberg Dollar Spot Index has fallen over 1% in May, with the currency losing ground against all of its major counterparts. Even the yen, which declined for four straight months, climbed in May thanks to a record $62 billion intervention by the Japanese authorities.
The dollar’s about-face came after Fed Chair Jerome Powell waved off worries that the central bank may raise interest rates again, while a slightly smaller-than-expected rise in the consumer price index eased inflation fears. That marked a break from much of this year, when the dollar rose along with U.S. bond yields as rate-cut bets were priced out of the market.