Dollar weakens as Fed rate-cut wagers gain traction

4 Dec 2023 , 09:58 AM

As markets digested cautious statements from Federal Reserve Chair Jerome Powell and awaited a crucial employment report that may impact the future for U.S. interest rates, the dollar began the week on a wobbly note on Monday.

After hitting the $40,000 mark for the first time in more than a year, Bitcoin took front stage in the Asian morning.

Powell stated on Friday that it was evident that the economy was slowing down as anticipated as a result of US monetary policy, with the benchmark overnight interest rate being ‘well into restrictive territory.’

While Powell reaffirmed that the Fed is ready to tighten policy once more if necessary, markets were certain that the cycle of rate hikes was finished.

According to the CME’s FedWatch tool, markets were pricing in a 60% possibility of a rate cut by the March meeting, up from 21% just over a week earlier.

The U.S. dollar index, which compares the value of the dollar to six important rivals, was last trading near Friday’s closing of 103.28.

The dollar was trading at $146.58 yen against the yen, down from its session low of 146.24, which was reached on September 11. The nearly 33-year low of 151.92 per dollar that was set in the middle of November has been recently retreated from by the yen.

The kiwi increased slightly to as high as $0.6222, its highest level since late July, while the Australian dollar surged to a new four-month high versus the US dollar of $0.669.

With the greenback at $1.2733, a three-month high, sterling was trading at about $1.2682 as of last week.

This week’s currency markets may also be influenced by remarks made by a number of European Central Bank officials in front of a barrage of regional economic data, notably the euro bloc’s revised third-quarter GDP statistics on Thursday.

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