USD has the strongest week of depreciation in 5 months

The Dollar Index - which measures the greenback's strength against six major currencies - fell 0.8% this week - the most since mid-January.

The dollar weakened as investors bet the Federal Reserve would stop raising interest rates this month and Congress would pass a debt ceiling bill. The index was down 0.1% from yesterday.

Investors are betting the Fed will pause its rate hikes next month, making the greenback less attractive to buyers outside the U.S. Philadelphia Fed President Patrick Harker said on June 1 that “it’s time to hit the pause button once and see what happens.”

A day earlier, Fed Board of Governors member Philip Jefferson also said that "skipping a rate hike at the upcoming meeting will allow the board time to receive more data, from which to decide on the scale of policy tightening." The next Fed meeting is June 13-14.

With the debt ceiling issue behind them, investors will now turn their attention to central banks and economic data. However, we have mixed messages. "Recently, two Fed officials have mentioned a pause in June, but have not ruled out a hike this summer. I think the expectation of a rate hike could still support the USD," said Fiona Cincotta, market strategist at City Index.

Recent U.S. manufacturing data has been weak, reinforcing the view that interest rate hikes are on hold. However, the labor market has not cooled down. The U.S. May jobs report will be released today.

The market now predicts a 29% chance of a Fed rate hike, down sharply from nearly 70% earlier this week.

In addition, the fact that the US House of Representatives and the US Senate have both passed a debt ceiling bill is also believed to have weakened the USD. "This will cause investors to accept higher risks, thereby negatively affecting the USD," explained Ray Attrill - Director of Foreign Exchange Strategy at National Australia Bank.

UBS also said on May 30 that the debt ceiling agreement would support risky assets, putting pressure on the USD. The US dollar is considered a safe haven asset during times of volatility.

Ha Thu (according to Reuters)

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