The dollar index (DXY) closed nearly unchanged on Friday, August 22, 2026, slipping just 0.02% as a broad rally in US equities curbed demand for the greenback as a liquidity haven. The index held just above Thursday’s 3.25-month low, with traders still digesting the US Treasury’s midweek announcement that it would increase buybacks of long-dated bonds—a move that has weighed on the currency and fueled demand for hard assets like gold.
Mixed US Data Leaves Rate Path Unclear
Friday’s economic releases painted a contradictory picture for the US economy. The August S&P manufacturing PMI fell to 53.2 from 53.9, missing expectations for no change, while the services PMI jumped to 56.8 from 54.0, marking the fastest pace of expansion in four and a half years and beating forecasts for a decline.
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The divergent data points have left traders parsing the Federal Reserve’s next move. According to CME FedWatch data cited in the report, markets are currently discounting a 40% probability of a 25-basis-point rate hike at the next FOMC meeting on September 15-16, with the fed funds target range sitting at 3.50%-3.75%.
Euro Holds Firm on Strong Eurozone Data
The euro (EUR/USD) matched Thursday’s 3.25-month high, finishing up 0.02%. The single currency drew support from a batch of stronger-than-expected Eurozone data. The August manufacturing PMI rose to 52.8, the fastest expansion in 4.25 years, while the composite PMI climbed to 52.1. Consumer confidence also improved to a six-month high of -15.5.
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However, euro gains were capped after the European Central Bank’s July inflation expectations survey showed easing. One-year CPI expectations dipped to 2.9% from 3.0%, and three-year expectations fell to 2.7% from 2.8%, a dovish signal that could slow the ECB’s tightening path. Despite this, markets are pricing in a 95% chance of a 25-basis-point rate hike at the ECB’s September 10 meeting.
Yen Supported by BOJ Hike Expectations
USD/JPY slipped 0.02% as the yen found support from reliable Japanese economic data. The August manufacturing PMI rose to 55.1, matching April’s reading as the strongest in 8.5 years, while the services PMI hit a five-month high of 52.3. Japan’s July national CPI also accelerated to 1.9% year-over-year, up from 1.6% in June.
The yen has been underpinned by growing expectations that the Bank of Japan will raise its policy rate from the current 1.00%. Reports from Bloomberg last week indicated that Prime Minister Sanae Takaichi’s government supports a hike in either September or October to shore up the currency and curb import-driven inflation. Markets are currently pricing in an 81% chance of a 25-basis-point move at the BOJ’s September 18 meeting.
Gold Surges on Debasement Hedging
Precious metals extended their weekly gains on Friday, with October COMEX gold (GCV26) settling up $108.00 (+2.38%) at a 3.25-month high, while September silver (SIU26) climbed 2.09% to a two-month high. The primary catalyst remains Wednesday’s US Treasury announcement, which has amplified concerns about the long-term purchasing power of the dollar and boosted the appeal of metals as stores of value.
Industrial demand signals also supported silver, with manufacturing PMIs expanding at multi-year highs in both the Eurozone and Japan. Fund flows have turned decisively bullish, with gold ETF long holdings reaching a 2.5-month high on Friday and silver ETF longs hitting a four-month high earlier in the week. Central bank buying continues to provide a structural floor under gold prices; the People’s Bank of China added 640,000 ounces to its reserves in July, marking its twenty-first consecutive month of purchases, according to data released on August 7.
This article is for informational purposes only and does not constitute financial advice. Currency and commodity markets are highly volatile; readers should conduct their own research before making any trading decisions.
