The dollar has declined for the fourth consecutive trading day, influenced by dovish signals from Federal Reserve officials and growing concerns about U.S. regional banks, potentially marking its largest weekly drop in over two months. The Bloomberg Dollar Spot Index has fallen by 0.5% this week, representing its worst performance since July, while U.S. two-year Treasury yields have dropped to a six-week low. Traders are increasingly betting on Federal Reserve rate cuts, with current market pricing indicating a cumulative reduction of 53 basis points by the end of the year, up from 46 basis points on Wednesday. Federal Reserve Governor Christopher Waller stated on Thursday that to support the weakening labor market, officials could adopt a gradual approach to interest rate cuts, adjusting by 25 basis points each time. Meanwhile, Governor Stephen Miran reiterated his view that a rate cut of "twice that size" (i.e., 50 basis points) would be more appropriate this month. Despite the U.S. government shutdown entering its third week, with little sign of resolution and a shortage of economic data releases, the statements from Federal Reserve officials have encouraged investors to increase their exposure to dovish policies. “Economic data shortages do not seem to concern the Federal Reserve. We expect that at the October meeting, the Fed will cut rates again by 25 basis points,” economists from Morgan Stanley, led by Michael Gapen, stated in a report. Additionally, the dollar weakened further due to concerns over tighter loan standards leading to a drop in regional bank stocks and a reduction in political risks in Japan and France. Analysts Chris Turner and Francesco Pesole from ING Bank NV noted that multiple factors are concurrently pressuring the dollar, making it challenging to predict the bottom of this dollar sell-off. They wrote in their report: “The sudden intensification of scrutiny on U.S. regional banks is impacting the stock market and the dollar; at the same time, the dollar faces negative effects from the repricing of Federal Reserve policies (leaning dovish), market expectations for a ceasefire in Ukraine, declining oil prices, and ongoing trade tensions between the U.S. and China.” In the forex options market, although positions still lean towards a stronger dollar by year-end, near-term market sentiment for the coming week has shifted to a more pessimistic outlook. The dollar has given back approximately one-third of its rebound from a three-year low last month. European traders indicate that market confidence remains low, with investors tending to hold short-term positions and making trading decisions primarily based on immediate news events. This trend is evident in both the spot and options markets, where major currency pairs are gradually reverting to recent averages.