As traders look to the Fed for cut timing cues, the dollar weakens

13 Dec 2023 , 09:08 AM

As traders awaited the end of a Federal Reserve policy meeting and any indications regarding the timing of the U.S. central bank’s interest rate reductions, the dollar continued to weaken against its main competitors on Wednesday.

Early Asian trade saw the US dollar teetering downward to 145.385 yen, compounding its 0.5% drop from the previous session. In relation to the euro, it was likewise little lower at $1.0798 after dropping by roughly 0.28% on Tuesday.

After falling by 0.31% over night, the dollar index, which compares the value of the US dollar to the euro, yen, and four other currencies, remained stable at 103.82.

After a meeting when experts and investors expected rates to remain on hold, Fed officials release new economic and interest rate estimates later in the day. Investors will be focused on how they see the economy holding up.

Investors will be especially interested in seeing whether Fed Chair Jerome Powell opposes the idea of interest rate reductions in the first half of 2024.

Though data released tonight indicated that consumer prices unexpectedly increased in November, recent indicators pointed to a soft landing.

A quarter point rate drop in May is now priced in by traders.

The Bank of England, the European Central Bank, the Norwegian Bank, and the Swiss National Bank will also be making policy decisions later this week; of these, Norway is thought to be the only one having the ability to hike interest rates. Additionally, there’s a chance the SNB will lessen its franc support in foreign exchange markets.

Next week is the Bank of Japan’s policy meeting. Amid rumours that the central bank is getting close to abandoning its negative rate policy, the yen has been turbulent. Building expectations that this may happen on Tuesday of next week were shattered when Bloomberg revealed this week that BOJ officials don’t think there’s much of a need to hurry out.

The Australian dollar increased by 0.09% to $0.6565 while the value of New Zealand’s currency increased by 0.07% to $0.06139.

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