US dollar slips to 5-month low as US inflation cools
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THE dollar index edged down on Friday (Dec 22), hitting a near five-month low as data showed annual US inflation slowed further below 3 per cent in November, cementing market expectations for a US interest rate cut next March.
In the 12 months through November, inflation, as measured by the personal consumption expenditures (PCE) price index, stood at 2.6 per cent, easing from 2.9 per cent in October.
Excluding the volatile food and energy components, the so-called core PCE price index advanced 3.2 per cent year on year in November, the smallest rise since April 2021. The Federal Reserve tracks the PCE price measures for its 2 per cent inflation target.
The dollar has come under selling pressure after last week’s Federal Reserve meeting prompted traders to pencil in several rate cuts in 2024, starting as early as March.
US Federal Reserve officials have since been pushing back on the idea of rapid rate cuts next year.
The dollar index was last down 0.08 per cent at 101.7, after dipping as low as 101.42, its lowest since late July. The index is on pace to finish the year down about 2 per cent.
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The Federal Reserve’s dovish December pivot has boosted the case for the dollar to keep falling into 2024, though strength in the US economy could limit the greenback’s decline.
The euro was up 0.02 per cent.
Sterling gained 0.09 per cent to US$1.2703 as traders digested data that showed British retail sales in November had jumped by much more than expected, but third-quarter GDP was revised lower.
The dollar edged higher against the yen last up 0.25 per cent at 142.465 yen, after data showed that Japan’s core inflation slowed sharply in November to a pace unseen in over a year.
The risk-sensitive Australian and New Zealand dollars traded higher on the day.
The Aussie was last up -0.04 per cent at US$0.68, earlier having touched US$0.6825, its highest since July. The kiwi traded up 0.07 per cent at US$0.62985, also a five-month high. REUTERS
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