NEW YORK: The US dollar was at its lowest level since mid-June against the Japanese yen on Monday as investors weighed the likelihood that the Federal Reserve will not raise interest rates as aggressively as some had expected.

The US dollar index was volatile after data showed US manufacturing activity slowed less than expected in July. But a key report for investors this week will be the US jobs report on Friday.

“It’s the beginning of a new month, and the real focus is on the possibility that the Fed slows down its rate hikes,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.

“The big focus is on the jobs market at the end of the week, and that’s likely to confirm that the improvement in the labor market is moderating,” he said. “But pre-COVID, it would still be regarded as a very robust number.”

The dollar index is up about 10% for the year so far following investor expectations of aggressive Fed rate hikes.

“After a big move, I think we’re really consolidating,” Chandler said.

Last week, the dollar crumbled against the yen, and two-year yields in the US Treasury market also fell, after data showed the US economy shrank for a second straight quarter.

The dollar sank to its lowest level versus the yen since mid-June, and was down from a late 1998 peak of nearly 140 yen which it hit last month. The dollar was last down 1.1% at 131.74.

The dollar index was last at 105.26, down 0.7%.

The broad weakness in the dollar helped the euro, which was up 0.5% at $1.0273.

Currency investors were also watching news on US House of Representatives Speaker Nancy Pelosi’s expected visit to Taiwan. Pelosi was set to visit Taiwan on Tuesday, two people briefed on the matter said, according to a Reuters report. China has warned that its military would never “sit idly by” if she visited the self-ruled island claimed by Beijing.

The Aussie dollar rose 0.6% to $0.7036 before a central bank rate hike on Tuesday.