The US dollar has been on a roller coaster ride. Many have lost confidence in the underlying trend. An important prop for the dollar, namely the prospects for the Fed’s lift-off has been pushed out again, this time ostensibly due to the heightened volatility of the financial markets, apparently sparked by events in China.
The September Fed funds futures have nearly fully priced out the risk of a hike next month. The effective Fed funds have traded 14-15 bp this month, and the September Fed funds contract implies an average effective rate of 17.5 bp next month.