Dollar fell in European trade on Friday against a basket of major rivals, resuming losses and approaching five-month lows amid prospects of early US interest rate hikes in 2024.
Dollar is heading for the second monthly loss in a row as US 10-year treasury yields tumble alongside it, with the Federal Reserve tipped to move into policy easing.
The dollar is also heading for the first yearly loss in three years after the Federal Reserve took a bearish stance at the December policy meeting.
The Index
the dollar index fell 0.1% to 101.9, with a session-high at 101.42, after rising 0.3% yesterday, the first profit in five sessions away from a five-month trough at 100.62.
Selloff
Dollar is facing a selloff after the Federal Reserve took a decidedly bearish stance at the December policy meeting, paving the way for early interest rate cuts in 2024.
A string of US data showed that inflation is slowing down, in turn reducing pressures on the Fed.
Recent US consumer spending showed the slowest pace since March 2021.
US rates
Current pricing for a US interest rate cut at the Fed March meeting stood at 87%, while pricing for such a cut at the May meeting stood at 99.5%.
Monthly Trades
The dollar index is down 2.3% so far in December on track for the second monthly profit in a row.
US 10-year treasury yields tumbled by over 11% this month, hitting a five-month trough on Wednesday at 3.783%.
Such developments came after the Fed announced this month the end of the current cycle of policy tightening, paving the way for policy easing next year.
Yearly Trades
The dollar index is down by over 2.3% in 2023, on track for the first yearly loss in three years.
The Fed took a more bearish trajectory this year with monetary policies compared to the ECB and the BOE.
The European Central Bank rose interest rates by 200 basis points this year, while Bank of England raised rates by 175 basis points, compared to just 100 basis points by the Fed, putting the dollar into a disadvantage.
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