The Dollar dropped to its lowest point in three weeks against the Yen and remained near multi-month lows against the Euro and Pound as investors considered the possibility of the Federal Reserve beginning a series of interest rate cuts.

The greenback fell by as much as 0.7% to 143.45 Yen, its weakest level since 5th August, and was last down by 0.4%, Reuters reports.

However, the Dollar strengthened against the Euro and Pound after hitting new multi-month lows the previous week. Traders were also monitoring the effects of rising tensions in the Middle East.

In a highly anticipated speech at the annual economic conference in Jackson Hole, Wyoming, on Friday, Fed Chair Jerome Powell supported the imminent start of interest rate cuts, stating that additional cooling in the job market would be undesirable.

“Powell did not say anything new but officially validated some of the things that markets were pricing in, including the idea of a cut, shift of focus from inflation to labour market,” stated Samy Chaar, chief economist at Lombard Odier in Geneva.

That said, he did not anticipate a significant further decline in the Dollar in the near term.

“Huge Dollar weakness from here would mean that the market is not pricing in enough cuts which I feel is a bit of an exaggeration.”

Traders are widely anticipating that the Fed will begin its easing measures on 18th September. However, they estimate a 39% chance of a substantial 50-basis point cut, according to the CME Group's FedWatch Tool, up from 25% the previous week.

The Dollar index, measuring the currency against six peers, was flat at the time of writing at 100.71, near the 13-month low of 100.60 hit last week.

Elsewhere, the Pound eased to $1.3199 after rising as much as $1.32295 on Friday, the first time in 17 months, whereas the Euro fell to $1.1180, just off its session high of $1.1205, a level last seen in July 2023.