Dollar stumbles to over two-month low as markets eye Fed cuts
By Rae Wee
SINGAPORE (Reuters) -The dollar slid to a two-month low on Monday, extending its downtrend from last week as traders reaffirmed their belief that U.S. rates have peaked and turned their attention to when the Federal Reserve could begin cutting rates.
The yuan struck three-month highs in both the onshore and offshore markets, propped up by China's central bank, while the Australian dollar similarly scaled a three-month top against the falling greenback.
The dollar index in Asia trade bottomed at 103.64, its weakest level since Sept. 1, extending its nearly 2% decline from last week — the sharpest weekly fall since July.
Markets have priced out the risk of further rate hikes from the Fed following a slew of weaker-than-expected U.S. economic indicators last week, particularly after an inflation reading that came in below estimates.
Focus now turns to how soon the first rate cuts could come, with futures pricing in a 30% chance that the Fed could begin lowering rates as early as next March, according to the CME FedWatch tool.
«Market pricing for FOMC policy is likely to remain pretty steady, so the dollar should have very few catalysts to move it around this week,» said Carol Kong, a currency strategist at Commonwealth Bank of Australia (OTC:CMWAY) (CBA). «If we do see risk appetite improve again, then the dollar can definitely weaken further.»
Against the weaker dollar, the euro rose to an over two-month high of $1.0924, ahead of flash PMI readings in the euro zone due later this week.
Sterling was last 0.1% higher at $1.2475.
Also due this week are minutes of the Fed's latest meeting, which will offer some colour on policymakers' thinking as they held rates steady for a second time earlier this month.
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