Dollar snaps two-year winning streak on 2024 rate cut bets
By Rae Wee
SINGAPORE (Reuters) — The dollar looked set on Friday to end 2023 with a loss, reversing two straight years of gains, dragged by market expectations that the U.S. Federal Reserve could begin easing rates as early as next March.
The greenback stayed broadly on the back foot on the last trading day of the year, with currency moves subdued amid a holiday lull leading up to the New Year.
Since the Fed launched its aggressive rate-hike cycle in early 2022, expectations of how far U.S. rates would have to rise have been a huge driver of the dollar for the most part of the past two years.
But as economic data subsequently pointed to signs that inflation in the United States is cooling, investors turned their focus to how soon the Fed could begin cutting rates — expectations which gathered steam after a dovish tilt at the central bank's December policy meeting.
Against a basket of currencies, the greenback fell 0.02% to 101.18, languishing near a five-month trough of 100.61 hit in the previous session.
The dollar index was on track to lose more than 2% for the month and roughly 2.2% for the year.
«The dollar is likely to come under pressure in 2024 as (the) Fed formally signals a dovish pivot, but we need to see how growth outside the U.S. transcends,» said Charu Chanana, head of FX strategy at Saxo.
A weakening dollar meanwhile brought relief to other currencies, with the euro last at $1.1076, hovering near a five-month peak, and on track to rise more than 3% for the year.
Sterling was similarly on track for a 5% yearly gain, its best performance since 2017. The British pound was last 0.04% higher at $1.2740.
While policymakers at the European Central Bank (ECB) and the Bank of England (BoE) did not signal any
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