Sour week for USD, worst performance in months
The U.S. Dollar is closing the week much weaker than where it started after its worst weekly performance since the second week of April 2025, according to the Bloomberg Dollar Spot Index.
Down roughly 1.0% in overall value, the Buck has stumbled after a surprising move by the U.S. Treasury to buy back long-dated bonds in an attempt to bring down historically high yields. Since the announcement was made, yields have started to creep back up, meaning the market was not satisfied with the logic behind the intervention, especially at a time when the Federal Reserve is fostering a more hands-off environment when it comes to financial markets freely deciding where interest rates land. The contrasting approaches only seem to confuse investors, who appear set on demanding higher premiums if they are to finance deficits, especially after the U.S. figure passed $40.0 trillion.
It does not appear to be a good look for the Buck, which has fallen to multi-month as well as multi-year lows against some currency pairs. LATAM currencies such as the Colombian peso (COP) and Mexican peso (MXN) had solid runs, with the former climbing by over 2.0% and the latter by 1.0%. Additionally, the typically safe-haven and steady Swiss franc (CHF) had its best week of advancement since the end of January, while BRICS currencies, including the Brazilian real (BRL), Russian ruble (RUB), and South African rand (ZAR), rose by an average of 1.3%. Subsequently, the MSCI Emerging Markets Currency Index jumped to a fresh record all-time high.
What to Watch This Week…
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EUR
The Euro hit a fresh high, its strongest point since early May, following better-than-expected figures as PMIs were released earlier. The August PMI Composite reading came in at 52.1 vs. 51.7, indicating more expansion than anticipated and also outdoing the prior month. There was solid optimism from the manufacturing perspective, something to note lately as the eurozone has worked on expanding capabilities after shocks to global trade emanating from tariffs as well as the hold on seaport traffic and the energy crisis resulting from escalating armed conflict. Next week will be very light for the EU, with some countries observing holidays as we approach the last weeks of summer and the final month of Q3.