The U.S. dollar weakened against the euro and Swiss franc on Friday, setting up a potential 2% monthly decline in August as investors adjusted portfolios ahead of a widely anticipated Federal Reserve interest rate cut in September.
The greenback initially gained after inflation data came in line with expectations but later lost ground. According to the U.S. Commerce Department, the Personal Consumption Expenditures (PCE) Price Index rose 0.2% in July, following a 0.3% increase in June. This reading, consistent with forecasts, leaves the Fed on course to ease policy at its next meeting on September 16–17.
Money markets have priced in an 87% probability of a rate cut, sharply higher than the 63% expectation recorded a month earlier, according to the CME FedWatch tool. The dollar index, which measures the U.S. dollar against six major peers, slipped 0.14% to 97.760 by Friday’s close.
Market Positioning and Business Sentiment
Traders and institutional investors have been rebalancing portfolios toward the end of August, reflecting both the U.S. dollar’s softness and broader equity market performance. U.S. equities posted solid gains throughout the month, prompting portfolio hedging in currency markets.
“Investor sentiment remains cautious. Weak consumer confidence continues to weigh on positioning, while businesses are carefully watching how the Fed’s decisions will impact credit conditions in the months ahead,” said Uto Shinohara, senior investment strategist at Mesirow Currency Management.
For entrepreneurs and global businesses, a softer U.S. dollar presents opportunities and challenges. Export-oriented companies may benefit from improved price competitiveness in overseas markets, while import-reliant sectors could see higher costs as foreign currencies strengthen.
The volatility has underscored the importance of risk management, particularly for startups and mid-sized firms engaged in cross-border trade. Currency hedging strategies are being revisited as business leaders prepare for potential shifts in global demand, capital flows, and borrowing costs.
Global Currency Movements
The euro rose 0.12% to $1.1699, supported by stable inflation expectations across the euro area. Data released Friday showed that French consumer prices rose slightly less than anticipated in August, while Spain’s EU-harmonized inflation rate held steady at 2.7%. The European Central Bank survey confirmed that inflation expectations remain close to its 2% target, reinforcing confidence in the region’s stability.
Sterling held steady at $1.3511, while the U.S. dollar eased 0.09% against the yen to 146.83. The Swiss franc strengthened 0.24%, with the dollar trading at 0.7999.
Beyond Europe, several key currencies registered notable moves. The New Zealand U.S. dollar gained slightly after Reserve Bank of New Zealand Chairman Neil Quigley announced his resignation, citing challenges within the institution following the sudden departure of its governor earlier this year.
Meanwhile, China’s Yuan advanced to its strongest level in 10 months against the U.S. dollar. The move was driven by steady central bank currency fixings and rising domestic stock market momentum, underscoring the role of investor confidence in Asia’s largest economy. In contrast, the Indian rupee weakened to a record low, reflecting concerns about trade dynamics and potential economic pressure from global tariffs.
Implications for Businesses
Entrepreneurs and corporate leaders are closely monitoring these developments as global currency dynamics shape cost structures, trade flows, and investment strategies. A weaker dollar can ease overseas sales for U.S. firms but raise input costs for those dependent on imports.
For multinational companies, stable inflation expectations in Europe and steady economic signals from Asia provide some reassurance amid U.S. monetary policy uncertainty. Still, volatility is expected to remain elevated in September, as businesses await the Fed’s decision and further economic data releases.
Karl Schamotta, chief market strategist at Corpay, noted that while September’s rate cut looks increasingly certain, the Fed may adopt a measured pace in subsequent moves. “The inflation data makes it more difficult to justify an aggressive course of rate cuts beyond September,” he said.
For entrepreneurs, this environment emphasizes the need for agility in financial planning and risk management. Companies engaged in global trade, tech, and manufacturing sectors in particular are adapting to shifting currency valuations while staying alert to policy signals from central banks.
As August closes, businesses worldwide are recalibrating strategies for the final quarter of 2025, with currency trends set to play a defining role in shaping opportunities and risks.
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Sources:
https://www.reuters.com/world/africa/dollar-hits-lowest-since-end-july-ahead-us-jobs-data-2025-09-01
https://finance.yahoo.com/news/dollar-under-pressure-traders-return-010444702.html
