Dollar weakens as traders increase bets on Fed rate cuts

11 Oct 2024 , 10:19 AM

The US dollar slid from two-month highs achieved overnight against its main counterparts, as evidence of labour market weakness bolstered the case for further Federal Reserve rate reduction.

Despite this, the dollar advanced for the second week in a row on Friday after surprisingly strong monthly payrolls data last week forced traders to abandon bets on a half-point decrease at the Fed’s next policy meeting.

The euro was steady at $1.093650 after recovering overnight from a two-month low of $1.090025.

The Australian dollar remained strong at $0.67395 after recovering from its lowest point since September 16 at $0.6702 on Thursday.

The market’s view of Thursday’s jump in initial unemployment claims was muddled by an increase in the consumer price index (CPI) on the same day, which served as a warning that tighter monetary policy may be required to keep inflation under control.

The two-year U.S. Treasury note yield, which normally moves in lockstep with interest rate predictions, declined on the day and was at 3.9531% early Friday, putting the dollar under pressure.

The dollar index, which measures the currency against six peers, was unchanged at 102.84, down 0.3% from 103.17 on Thursday, the highest level since August 15. The index is expected to rise 0.39% this week, following last week’s 2.06% increase.

While the Fed has said that it will prioritise full employment over price stability, investors had been looking to the CPI data for evidence that inflation was under control.

For feedback and suggestions, write to us at [e-mail]