Schedule dollar index at intervals of 1 day
The dollar posted its second sharpest weekly decline against other major currencies this year. The yen strengthened sharply and the dollar traded below 150 yen amid growing concerns about a weakening global economy.
Weaker-than-expected U.S. inflation data released on Tuesday has accelerated market expectations for how soon the Federal Reserve will cut rates. The market is betting that the first rate cut in the US could happen as early as the first quarter of next year. This weakens underlying support for the dollar, which strengthened under this factor in 2022 and rose in July-October 2023 on risks that the Fed has not yet reached the peak of rate hikes.
The dollar index fell to its lowest since Sept. 1 and the yield on the benchmark 10-year Treasury note fell to a two-month low of 4.379%.
Data that showed a slight increase in US home construction in October briefly supported the dollar, but with inflation being the market’s main driver, the dollar remained lower on the day.
“The flow of recent data points to progress being made on the inflation front,” said Bipan Rai, head of North American currency strategy at CIBC Capital Markets in Toronto. “It feels like the initial momentum now is to push the dollar lower.”
The dollar index fell 0.49% on Friday, hitting a low of 103.85, and fell 1.8% for the week, its biggest weekly drop since mid-July.
“Everything points to a slowdown in the U.S. economy in the fourth quarter,” said Thierry Wiseman, global FX and interest rate strategist at Macquarie in New York.
In his opinion, the key signal will be that companies will lower growth expectations.
“They’re not seeing the pricing power that they saw in the third quarter, and they’re not seeing the enthusiasm from customers that they saw in the third quarter,” Wiseman said.
The euro rose 0.52% to $1.0906 after Eurostat data confirmed annual inflation in the euro zone slowed sharply in October.
The yen, hit hard this year by the dollar’s strength, broke above 150 for the first time in nearly two weeks, rising 0.69% to 149.68 per dollar. The US currency is down about 1.4% against the Japanese currency since Monday.
Japanese authorities do not take into account specific exchange rate levels when deciding when to intervene in the foreign exchange market, Deputy Finance Minister Ryosei Akazawa told parliament on Friday.
The yen’s strength reflects the fact that worldwide there are “growing concerns about slower economic growth,” said Lee Hardman, currency analyst at MUFG, adding that Japanese terms of trade were less affected by falling energy prices.
Weaker-than-expected UK retail sales data added to a slew of negative indicators this week, but sterling jumped to $1.2458, up 0.42% on Friday.
Data around the world raises concerns about the economic outlook but also suggests central banks may be winning the fight against rising prices.
Futures markets are pricing in a 93 basis points (bps) cut in the Fed’s overnight lending rate by December 2024, which has contributed to the dollar’s weakness.
Money markets have also almost fully priced in a 100 bps rate cut in the eurozone. next year. However, European Central Bank (ECB) policymakers Robert Holzmann and Joachim Nagel said on Friday the bloc should be prepared to raise interest rates again if necessary.
Prepared by ProFinance.Ru based on materials from Thomson Reuters
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The dollar fell sharply on news from the United States