The US dollar fell to a three-month low as investors trimmed their bets on further interest rate hikes by the Federal Reserve.

The dollar has fallen to a three-month low as a series of weak U.S. economic data led investors to lower expectations for further rate hikes from the Federal Reserve. The U.S. dollar spot index has declined for the third consecutive trading day, hitting its lowest level since May 15. The probability of a Fed rate hike next month, as reflected in the market, has dropped to one-third, down from around 75% at the end of July. Previously, the U.S. released disappointing July employment data, moderate inflation, and unexpectedly weak retail sales figures. This week, there are few significant data releases that could trigger a substantial breakout for the dollar, with Fridays global purchasing managers' index possibly being the next substantial test. Elias Haddad, Global Head of Market Strategy at Brown Brothers Harriman, stated that if U.S. economic data improves and strengthens the country's growth advantage, it could boost the dollar. However, the market currently expects the further hike during this tightening cycle to be only around 36 basis points, and options markets indicate that the dollar will face greater pressure in the short term. One-month options have turned bearish on the dollar for the first time since the end of February, while longer-term options remain bullish.