The US dollar softened against major currencies this week, reflecting waning expectations for aggressive rate hikes by the Federal Reserve. The Dollar Index, which tracks the greenback against six other currencies, fell by 0.5% to 101.80, marking its lowest level in four weeks. The euro, buoyed by the European Central Bank’s hawkish stance, rose 0.8% to 1.1250, while the British pound edged higher to 1.3650.

Analysts attribute the dollar’s decline to mixed economic data from the US, which showed slowing retail sales and weaker-than-expected manufacturing activity. While the labor market remains strong, inflation has shown signs of easing, prompting speculation that the Fed may pause rate hikes sooner than expected. Meanwhile, the Japanese yen gained ground, trading at 129.80 per dollar, as the Bank of Japan hinted at potential adjustments to its ultra-loose monetary policy. Emerging market currencies also performed well, with the South African rand and Brazilian real benefiting from higher commodity prices. Forex traders are now closely watching next week’s Federal Reserve meeting for further direction on monetary policy.