The dollar index fell slightly on Friday to hit its lowest level in nearly five months as data showed annual US inflation slowed below 3% in November, boosting market expectations for a US interest rate cut next March.
In the 12 months to November, inflation as measured by the personal consumption expenditure (PCE) price index came in at 2.6%, slowing from 2.9% in October.
Excluding volatile food and energy components, the core PCE price index rose 3.2% year over year in November, the smallest increase since April 2021. Reserve The federal government tracks PCE price measures to meet its 2% inflation target.
“The market will see the data as strongly reinforcing the Fed’s recent move toward looser monetary policy,” said Stuart Cole, chief macroeconomic economist at Equiti Capital.
“This is the Fed’s preferred measure of inflationary pressures, so if you consider that we’re still feeling some of the tightening that’s been done so far, then I think the FOMC may start to think privately that it’s done its job of getting inflation back under control,” he added .
The dollar came under selling pressure after last week’s Federal Reserve meeting prompted traders to forecast several rate cuts in 2024, starting in March. Federal Reserve officials have since pushed back on the idea of a quick rate cut next year.
The last time the dollar index fell 0.08% has 101.7 after reaching 101.42, the lowest level since late July. The index is expected to fall around 2% at the end of the year. The Federal Reserve’s dovish pivot in December strengthened the case for a continued decline in the dollar through 2024, although the strength of the US economy could limit the dollar’s decline.
“The Fed moved ahead of the major central banks in timing the first rate cut, exposing the dollar to an interest rate differential working against it,” said Equiti Capital’s Cole.
The dollar hit a nearly nine-year low against the Swiss franc on Friday, losing 0.02%, returning to levels seen in January 2015, when the Swiss National Bank triggered intense volatility by ending the franc’s minimum exchange rate policy against the Swiss franc. euro.
The euro was up 0.02 %. European central bank he will need at least until the spring before he can reassess his policy outlook, and market expectations of a rate cut in March or April are premature, ECB chief Bostjan Vasle said on Monday. She gained a pound sterling 0.09% to $1.2703 as traders digest data showing UK retail sales rose much more than expected in November but third-quarter GDP was revised down.
The dollar strengthened slightly against the yen. 0.25% has 142,465 just after data showed Japan’s core inflation slowed sharply in November to a pace not seen in more than a year, underscoring an easing of cost pressures that could give the central bank more time before phasing out its massive monetary stimulus.
Earlier this week, the BOJ maintained its ultra-loose policy and gave little indication of when it might leave negative interest rates. The risk-sensitive Australian and New Zealand dollars gained on the day. The Australian dollar was in last place -0.04 % to $0.68 after touching $0.68. 0.6825 highest since July. The kiwi was trading higher 0.07% to $ 0.62985 five month maximum.
In cryptocurrencies, bitcoin fell 1.5% to 1.5%. 0.34% to settle 43,726 The cryptocurrency market hit an eight-month high of $44,729 earlier this month. A wave of demand for bitcoin and ether ETFs, including from traditional financial heavyweights, has helped revive the cryptocurrency market this year after a series of collapses in 2022.