The U.S. dollar plummeted in value against most other major currencies on Monday as the China syndrome hit the United States markets with a massive stock selloff as the Dow Jones Industrial Index (DJIA, -3.57%) fell by more than 1,000 points in the opening minutes of the trading session.
Analysts are saying that the fall in dollar values has all but killed any possibility that the Federal Reserve will increase interest rates at its September meeting as had been widely forecast up to a week ago.
The dollar has been on a downslide against the currencies of the major industrialized nations since the minutes of the last Fed meeting in July were released on Wednesday last week. The minutes revealed that a number of Fed officials had expressed the view that inflation was not rising fast enough to meet the conditions for a rate hike in September.
The value of the dollar against a basket of six currencies as measured on the ICE U.S Dollar Index (DXY, +0.41%) dropped by 1.7% to 93.3670. All wasn’t gloom and doom for the dollar however, as the currency strengthened against what are known as the commodity dollars such as the Canadian, Australian and New Zealand dollars. The Canadian dollar (CADUSD, +0.2187%) hit its lowest level against the U.S. dollar in 11 years after falling to C$1.3290 for 1 U.S. dollar. The fall in the commodity dollar currencies was a result of the continued slide in commodity prices, including crude oil and copper, making the currencies of producer countries sensitive to price moves in those assets.
Mineral producers, South Africa and Mexico were the biggest victims when the Mexican peso (MXNUSD, +0.340656%) and the South African rand (USDZAR, - 0.6522%) hit record lows against the United States currency on Monday. The peso recovered slightly later in the day while the rand, which dropped to a low of R14.48 to the dollar, ended the day down.
The strongest performing G10 currency against the dollar was the Japanese yen (USDJPY, +1.04%) as it traded at 118.73 yen to the dollar on Monday afternoon EST, up 2.7% for the day, after briefly touching 116.95 yen for 1 USD, its highest intraday level since early February. Investors are seeing the yen as a safe haven currency in a sea of calm surrounded by the turbulence of currency volatility.
Meanwhile, the euro (EURUSD, -0.5508%), which has suffered losses for most of the year largely as a result of the problems in Greece, recovered its losses for 2015 when it broke above $1.17 for the first time since mid-January. The euro has gained 4.5% on the dollar since the release on Wednesday of the minutes of the July Federal Reserve meeting, recovering almost half its losses for the year since then.