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By Bloomberg

The dollar retreated following its longest weekly rally of 2015 as the selloff in stocks and commodities fueled concern global growth will sag at a time when the U.S. is considering raising interest rates.

The slump in commodity prices and global equities, with China’s benchmark index plunging the most in eight years, weighed on the dollar. The U.S. currency weakened against 13 of its 16 major peers. The Federal Reserve meets this week to consider when to tighen monetary policy for the first time since 2006. The euro reached its highest in two weeks against the dollar, after the easing of tensions over Greece helped a measure of German business confidence to an unexpected rebound.

“The weakness in commodity prices is prompting some market participants to doubt whether the Fed will begin to raise rates in September,” said Lee Hardman, a currency strategist at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “This obviously takes some of the shine off the dollar in the very near term.”

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, declined 0.4 percent to 1,205 at 10:35 a.m. in London, after rising to 1,212.78 on Friday, the highest since March 19. The gauge has gained for the past five weeks, the longest stretch this year.

The dollar weakened 0.8 percent versus the euro to $1.1069. It had earlier reached $1.1113 per euro, its weakest since July 13. The U.S. currency fell 0.3 percent to 123.48 yen.

Fed Rates

Dollar bulls have been in the ascendancy since the middle of June as Greece inched toward a bailout deal, allowing traders to focus on Fed policy. Large speculators boosted wagers for a fifth week that the U.S. currency will rise against its major peers, the longest run this year.

Fed Chair Janet Yellen, who will oversee the two-day policy meeting starting Tuesday, said earlier this month she expected to raise borrowing costs this year, with subsequent increases proceeding gradually.

“Do you price the U.S. dollar on the fact that the Fed is beginning the process of normalization, or do you price the U.S. dollar on the fact that normalization is going to be a very long process?” said Sam Tuck, a senior currency strategist at ANZ Bank New Zealand Ltd. in Auckland. “Either way, the U.S. dollar goes up. It’s just that the pace of it significantly declines on the latter, rather than the former.”

Dollar Bulls

Investors increased bullish dollar bets to 375,137 contracts in the week ended July 21, the most since March 24, based on data from the Commodity Futures Trading Commission in Washington.

“Clearly most participants are anticipating that a rate increase this year will be appropriate,” Yellen said at a press briefing on June 17. “It will depend on unfolding data in the months ahead, but certainly an increase this year is possible. We could certainly see data that would justify that.”

There’s a 40 percent chance the Fed will increase its benchmark rate by September, according to futures data compiled by Bloomberg. A week ago the odds were 33 percent. The central bank has kept its benchmark in a range between zero and 0.25 percent since December 2008 to spur growth.

“We would expect some language tweaks at this week’s meeting to indicate that they are certainly open to September,” Sean Callow, a strategist at Westpac Banking Corp. in Sydney, said in an interview. “And yet the pricing is not really there yet. That’s one potential source of support for the U.S. dollar.”