2023-12-29 19:43:33
Since the start of 2023, the greenback has fallen by more than 3% against the euro and by almost 5% against the British pound.
The dollar held its ground on Friday for the last trades of the year, but remained lagging behind in 2023 against European currencies, when the yen was preparing to end the year in sharp decline against the greenback.
Around 8:20 p.m. GMT, the dollar index, which compares the greenback to a basket of currencies, gained 0.07% to 101.29 points. It advanced 0.14% against the European currency at 1.1045 dollars per euro.
“The index you dollar rebounded (Thursday), Treasury bond yields having increased”, and was still holding up against the pound and the euro on Friday, comments Ipek Ozkardeskaya, analyst at Swissquote.
However, the US dollar will have experienced “its worst year since 2020”, the first year of the Covid-19 pandemic, says the analyst.
Over the year 2023, the dollar index is expected to lose more than 2%. Since the start of 2023, the greenback has fallen by more than 3% against the euro and by almost 5% against the British pound.
Lower rates
Main trigger of the recent selling movement of the US dollar, “speculation on the markets has intensified regarding rate reductions earlier and deeper from the Fed (American Federal Reserve, editor’s note) next year,” explains Lee Hardman, analyst at MUFG.
“The emergence of more convincing evidence that a marked slowdown in US inflation is underway has been the main trigger for the recent sharp downward correction in US yields and the US dollar,” he continues.
The Fed also indicated during its last meeting that the monetary committee had discussed an early timetable for rate cuts.
At the same time, European currencies performed better over the year, recovering after being hit hard by the shock of the war in Ukraine, which has since eased with the fall in energy prices.
Although they have not fully recovered from their heavy losses suffered in 2022, the euro, the pound and the Swedish crown have nevertheless recorded notable gains this year.
“The only European currency that has continued to outperform this year is the Swiss franc (…) on track to close at its highest level against the euro and the US dollar since the start of the year 2015″, a time when the Swiss National Bank (SNB) had given up on blocking the parity at 1.20 Swiss francs for one euro, four years after having pegged the two currencies, explains Lee Hardman.
The Swiss franc has benefited since 2020 from its status as a safe haven during the Covid-19 crisis, “then from fears of an increase in inflation”, continues the analyst.
More recently, despite falling inflationary pressures, the Swiss currency has been buoyed by “increased risks of recession in Europe and intensified speculation on faster and deeper rate cuts from the ECB (Bank European Central, editor’s note) and the Fed”.
The Swiss franc benefits from its status as a safe haven
On the yen side, the Japanese currency suffered from the reluctance of the Bank of Japan (BoJ) to change course in relation to its ultra-accommodating monetary policy of negative rates, compared to the main other major central banks which opted for increases in successive rates to combat inflation.
The yen gained 0.30% against the dollar on Friday at 140.99 yen per dollar but ended sharply lower over the year against the greenback.
To a lesser extent, the Australian and New Zealand dollars also looked gloomy, “braked this year by persistent concerns about the health of the Chinese economy”, notes Lee Hardman.
The economies of Australia and New Zealand are indeed closely linked to the Chinese economy, an important trading partner. However, the economic rebound which followed the end of very strict health restrictions in China proved disappointing.
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