Bets on rate cuts in 2024 pressure US dollar to end the year ‎lower

On Friday, US dollar appeared on its way to ending the year 2023 with a loss, wasting its gains over two consecutive years amid expectations that the Federal Reserve (the US central bank) might begin cutting interest rates by next March.

According to Reuters, the dollar remained broadly declining on the last trading day of the year, amid a state of calm due to the holidays.

Since the US Federal Reserve launched its course to tighten monetary policy in early 2022, expectations related to the amount of need to raise interest have been a primary driver for the dollar.

But with the frequency of economic data indicating the continued slowdown in inflation in the United States, investors’ focus has shifted to when the central bank may begin reducing interest rates.

The dollar fell against a basket of currencies by 0.02% to 101.18, and is hovering near the lowest level in 5 months at 100.61, which it recorded in the previous session.

The dollar index is heading to record a loss of more than two percent during this month and about 2.2 percent for the entire year.

The weakness of the dollar provided breathing space for other currencies, including the euro, which recorded $1.1076 in recent trading and is hovering near the highest level in five months, and is on its way to rise by more than 3% this year.

The pound is on track to achieve annual gains of 5%, its best performance since 2017. Sterling rose in the latest trading by 0.04% to $1.2740.

As for the Australian and New Zealand dollars, which are sensitive to risks, they are on their way to achieving gains of 3.5% during the month, respectively, although they did not witness any significant change during the year.

In Asia, the yen is heading to record a decline of more than seven percent in 2023, continuing its decline for the third year under pressure from the ultra-loose monetary policy adopted by the Bank of Japan. The yen stabilized in the latest trading at 141.45 to the dollar

In China, the yuan on the mainland is heading to record an annual loss of approximately three percent, under pressure from the faltering recovery of the second largest economy in the world from the repercussions of Corona.

In the latest transactions, the yuan reached 7.0925 to the dollar, while its price abroad reached 7.0898 to the dollar.