Dollar Maintains One-Month High Amidst Reduced Rate Cut Expectations

17 Jan 2024 , 08:12 AM

Wednesday saw the dollar index remain at a one-month high compared to a basket of currencies, as comments made by Federal Reserve Governor Christopher Waller reduced anticipation of a rate cut in March.

The United States is ‘within striking distance’ of the Federal Reserve’s 2% inflation target, according to Waller, but the bank shouldn’t move quickly to decrease its benchmark interest rate until it is certain that lower inflation will be sustained.

Before supporting rate cuts, he stated on Tuesday, ‘I will need more information in the coming months confirming or (conceivably) challenging the notion that inflation is moving down sustainably towards our inflation goal.’

According to CME’s FedWatch Tool, market expectations of a rate drop in March have weakened to a 62.2% possibility from a 76.9% outlook in the previous session.

The dollar index, which compares the value of the US dollar to a basket of key world currencies, was last seen at 103.35. It had risen as high as 103.42 in the previous session, the highest since December 13. Additionally, Tuesday marked the largest percentage gain in the dollar since January 2.

In the meantime, the euro was hovering around a one-month low of $1.0875 following its sharpest percentage decline in a single day in the previous two weeks due to remarks made this week by many ECB governors that upheld ambiguity regarding the timing of rate decreases.

Almost constant at $1.2636, sterling was last seen on Tuesday following a steep decline due to statistics indicating a slowdown in British wage growth in the three months leading up to November.

Once more, there was pressure on the yen. At 147.45 per dollar, the Japanese yen hit its lowest level since early December, while U.S. government yields increased little to bolster the value of the dollar.

Asia’s attention is focused on key Chinese economic data for December, which will be released later on Wednesday. These data include fourth-quarter growth, which is predicted to have decreased from 1.3% to 1% between October and December.

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