© Reuters. US dollar and euro banknotes in an illustrative image from Reuters archives.
By Ankur Banerjee
SINGAPORE (Reuters) – It remained under pressure on Wednesday as the euro approached a four-month high as expectations that the Federal Reserve would cut interest rates soon dominated the market, and thin year-end flows kept trading volume limited.
The week is likely to witness weak trading as traders around the world spend vacations until the beginning of the new year.
The dollar index, which measures the performance of the US currency against six competing currencies, reached 101.54 points, close to its lowest level in five months of 101.42 points, which it touched last week. The index is heading towards a decline of 1.9 percent in 2023 after two consecutive years of strong gains against the backdrop of the US Central Bank raising interest rates to fight inflation.
The recent decline in the dollar results from the markets’ expectation that the Federal Reserve will cut interest rates next year, which will affect the attractiveness of the dollar.
Markets now expect a 79 percent chance of interest rates being cut starting in March 2024, according to CME Fed Watch.
Meanwhile, the euro fell 0.07 percent to $1.1034 after touching its highest level in four months at $1.1045 yesterday, Tuesday. The unit rose nearly three percent during the year and is on track to achieve gains for the third month in a row, which is consistent with the rise it achieved last year.
It fell 0.17 percent to 142.64 per dollar and is heading toward a decline of eight percent during the year despite its strength in recent weeks, with traders betting that the Bank of Japan will soon abandon its ultra-easy monetary policy.
The summary of the Bank of Japan’s December 18-19 meeting showed that the bank’s policymakers see the need to maintain ultra-loose monetary policy for the time being, and some of them called for a deeper discussion about abandoning this policy in the future.
The New Zealand dollar reached a new five-month peak but fell slightly in early trading. The Australian dollar’s latest trading price was $0.6822, while the New Zealand dollar reached $0.6321.
(Prepared by Mahmoud Reda Murad for the Arabic Bulletin)
2023-12-27 03:17:00
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