Greenback hits three-month low, set for biggest monthly fall in 2023
THE US dollar hit a three-month low against a basket of peers on Tuesday (Nov 28) before steadying, as traders continued to unwind long dollar positions before this week’s US and eurozone inflation data.
The US dollar index, a measure of the greenback against six major currencies, was last at 103.17 – a whisker above the 103.07 it touched in Asia trade, the lowest since Aug 31.
The index is on track for a loss of more than 3 per cent in November, its worst performance in a year.
“Markets have been wanting to get ahead of the next big theme – monetary easing, better conditions for risk assets and a weaker (US) dollar – but as we’ve seen this morning, that’s starting to run out of steam,” said Simon Harvey, head of FX analysis at Monex Europe.
“Shorter term we’re keeping an eye on the general sentiment in markets – the big trade of this month has been long equities short (US) dollar – and then these psychological levels – the euro has been bumping against US$1.0960 and each of its runs at that in the past week has been thwarted.”
The euro and sterling were broadly steady with the common currency at US$1.0954 and the pound at US$1.2628, both around their highest in about three months.
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Market expectation that the Federal Reserve’s rate increase cycle has finally come to an end has also put downward pressure on the greenback. US rate futures showed about a 25 per cent chance that the Fed could begin cutting rates as early as March and increasing to around 50 per cent by May, according to the CME FedWatch tool.
Traders are now eyeing the US core personal consumption expenditures (PCE) price index – the Fed’s preferred measure of inflation – this week for more confirmation that inflation in the world’s largest economy is slowing.
The PCE tops off a slew of other key economic events this week, including flash inflation data from major eurozone economies (with bloc-wide data due Thursday), Chinese purchasing managers’ index data and an Opec+ decision.
After delaying its policy meeting to this Thursday, the Organization of the Petroleum Exporting Countries and their allies including Russia (Opec+) is looking at deepening oil production cuts, Reuters reported, citing an Opec+ source.
The Japanese yen was a touch firmer at 148.45 per US dollar, continuing its recovery from the brink of 152 per US dollar earlier in the month as the US dollar weakened.
The Swiss franc was at 0.8810 per US dollar, steady on the day, also around its firmest since the start of September, and the Australian dollar briefly touched a near four-month high of US$0.6632.
The kiwi momentarily hit its highest since Aug 10 at US$0.6114 before sliding back. The Reserve Bank of New Zealand has its monetary policy meeting on Wednesday, where it is expected to keep interest rates steady at 5.50 per cent for the fourth straight time. REUTERS
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