2023-12-27T04:38:59+00:00
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/ The dollar remained under pressure on Wednesday, while the euro was approaching the highest level in four months, with expectations prevailing that the Federal Reserve (the US central bank) would cut interest rates soon, in light of meager flows at the end of the year that kept movements limited.
As traders head out for holidays globally leading into the new year, the shortened week is likely to see weak volumes.
The dollar index, which measures the exchange rate of the US dollar against the US dollar. The price of the currency against six competing currencies reached 101.54, a level close to the lowest level in five months at 101.42 that it touched last week. The index is headed for a decline of 1.9% in 2023 after two consecutive years of strong gains on the back of the Federal Reserve raising interest rates to fight inflation.
The recent weakness in the dollar was a result of markets anticipating interest rate cuts from the Federal Reserve next year affecting the attractiveness of the dollar.
Markets now expect a 79% chance of interest rate cuts starting in March 2024, according to the CME FedWatch tool, with up to 153 basis points of cuts priced in for next year.
Meanwhile, the euro fell 0.07% to $1.1034, after touching a four-month high of $1.1045 on Tuesday. The single currency has risen about 3% this year and is on its way to achieving gains for the third month in a row, which matches the rise it achieved last year.
The Japanese yen fell 0.17% to 142.64 per dollar and is on track to fall 8% this year, although the Asian currency has seen a bout of strength in recent weeks as traders bet that the Bank of Japan will soon exit its ultra-loose policy. . . . .
Summary of the central bank’s views at its December meeting The 18-19 meeting showed that policymakers at the Bank of Japan saw the need to maintain ultra-loose monetary policy for the time being, with some calling for a deeper debate on a future exit from massive stimulus.
Elsewhere, the Australian and New Zealand dollars reached a new five-month peak but fell slightly in early trading. The Australian dollar was last bought at $0.6822, while the New Zealand dollar was at $0.6321.