US Dollar Monthly Exchange Rates Forecast - August 2025

The U.S. dollar’s strong July rebound is losing steam in August as weaker-than-expected job numbers and downward revisions to prior months unsettle investor confidence. Growing fears over slowing growth, soft wage data, and heightened trade and geopolitical tensions are fueling expectations for Fed easing as early as September. While the typical summer lull is absent, markets are bracing for volatility, especially with Jackson Hole on the horizon. If the dollar index breaks key support, a broader pullback may unfold as macro headwinds build.

The Canadian dollar remains stuck near 1.38/USD, caught between a softer greenback and weakening domestic momentum. A disappointing Q2 GDP print and slower hiring in July point to cooling conditions, even as inflation lingers just above target. The BoC has held steady, but markets are leaning toward a potential year-end cut. Adding to the uncertainty are Trump’s increasingly erratic tariff threats and the broader political noise out of Washington. In August, CAD may drift lower if energy prices soften or cross-border trade tensions reignite.

The euro slipped in July—its first monthly loss this year— as traders pared back long positions after the EU-US trade deal. Despite the pullback, EUR/USD is still up over 10% year-to-date. With only one more ECB rate cut now expected, improving inflation dynamics and revised growth forecasts provide a firmer backdrop. The euro could stabilize between 1.14 and 1.17 in August, with modest upside if U.S. data disappoints.

Sterling retreated to 1.323/USD in July, pressured by political dysfunction, weak consumer data, and uncertain fiscal outlook. The BoE is expected to cut rates this month, though sticky services inflation may slow the easing path. UK growth remains fragile, but GBP may still hold up against weaker-risk peers even as domestic headwinds mount.

The yen weakened sharply in July, breaching 150/USD for the first time in months amid BoJ hesitation, political gridlock, and vague trade agreements. Although inflation is edging higher, the central bank remains cautious, dampening yen sentiment. A reversal is possible if U.S. yields ease or Japan’s political climate stabilizes.

The Chinese yuan edged higher to 7.20/USD, as deflation concerns and lackluster policy support overshadowed modest export strength. The PBoC signaled a restrained easing path, and while front-loaded demand may offer short-term relief, structural pressures point to continued depreciation. Expect narrow ranges in August with a bearish tilt if global conditions weaken.

The Indian rupee held steady near 87.60/USD, underpinned by steady FX inflows, strong reserves, and RBI policy consistency. Though food inflation has risen, rate cuts are not yet on the table. Barring a spike in oil prices or hawkish Fed surprises, INR is likely to remain stable through August.

The Australian dollar briefly topped 0.65/USD before fading, dragged down by soft inflation data and tepid retail sales. A likely RBA rate cut this month adds to the pressure. Ongoing China concerns and subdued commodity demand could push AUD toward 0.63 unless risk appetite improves.

The New Zealand dollar followed AUD lower, retreating to 0.59/USD on weak dairy exports, slowing demand, and expectations for an RBNZ cut. While medium-term fundamentals remain sound, near-term softness is likely unless global data turns more supportive.

The Mexican peso stayed firm near 18.78/USD, bolstered by high real yields and conservative policy. Still, renewed trade friction with the U.S. and political noise could prompt some profit-taking. MXN remains one of the stronger EM currencies heading into August, but risks are building on the margin.