2023-12-27 09:14:00
© Archyde.com
It remained under pressure today, Wednesday, and the euro approached its highest level in four months, dominated by the US Federal Reserve cutting rates soon, in light of meager flows at the end of the year that kept movements limited.
With many traders away for the holidays, trading volumes are likely to be weak until the new year.
The dollar index, which measures the US currency against six competing currencies, recorded at 12:00 Riyadh time 101.47, close to the lowest level in five months at 101.42 that it touched last week. The index is on track to decline by 1.9% in 2023 after two straight years of strong gains, driven first by expectations and then actual hikes in interest rates by the Federal Reserve to fight inflation.
“With little to talk about on the economic calendar this week between global holidays, we do not expect a significant price swing at the end of this calendar year,” analysts at Monex USA said in a note.
The recent weakness – with the index set to post losses for the second straight month – was a result of markets anticipating interest rate cuts from the Federal Reserve next year, weighing on the dollar’s appeal.
Markets now expect a 79% chance of interest rate cuts starting in March 2024, according to the CME FedWatch tool, with more than 150 basis points of cuts priced in for next year. Data showing slowing inflation has encouraged easing bets next year.
Christopher Wong, currency strategist at OCBC in Singapore, said: “The decline in inflation has proven entrenched and expectations are that central banks will focus next year while growth remains on pace. This paints a favorable market for risk takers.”, according to Archyde.com. “.
It touched a new five-month high earlier in the session. The Australian dollar last bought $0.6828, while the New Zealand dollar reached $0.6333.
Meanwhile, it fell 0.04% to $1.10385, 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.
It fell 0.14% to 142.58 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. .
A summary of views at the central bank’s meeting on December 18-19 showed that policymakers at the Bank of Japan saw the need to maintain its ultra-loose monetary policy for the time being, with some calling for a deeper discussion on a future exit from massive stimulus.
The sentiment summary was somewhat pessimistic and showed no sense of urgency to end ultra-loose policies, according to strategists at Saxo Bank. The likely timing of the end of the policies will be later than the market expects, Saxo Bank strategists said in a note.
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