The dollar will see a yearly decline for the first time since 2020

 The dollar will see a yearly decline for the first time since 2020

The dollar will see a yearly decline for the first time since 2020

When the Fed starts reducing rates in 2024 will be the key question; will it be done so to prevent additional tightening because of falling inflation or because US economic growth is slowing down quickly?

Based on US predictions, the dollar is expected to finish 2023 down versus the euro and a basket of currencies, marking its first loss since 2020. In the event that inflation declines, the Federal Reserve will start lowering rates in 2019.

When the Fed starts reducing rates in 2024 will be the key question; will it be done so to prevent additional tightening because of falling inflation or because US economic growth is slowing down quickly?

The question of how far the dollar is going to fall is also central to the argument, as the market is already pricing in an aggressive reduction.

"As we anticipate the Fed cut cycle coming, we've already become quite bearish," said Brad Bechtel, global head of FX at Jefferies in New York.

At its December policy meeting, the Fed unexpectedly adopted an accommodation posture and projected a 75 basis point rate decrease for 2024, which exacerbated the dollar's drop.

Even more drastic cuts are priced in by the markets; a first decrease of 154 basis points is anticipated before the end of the year, and another is likely to occur in March.

The European Central Bank (ECB) and the Bank of England (BoE), two other significant central banks, expressed a different stance from the Fed, stating that they would maintain high interest rates for an extended length of time.

However, "I believe they will give in. In many respects, Britain and Europe are experiencing similar difficulties with slowing GDP and declining inflation at the moment, according to Bechtel. "If all three central banks are cutting, it will be very challenging to weaken the dollar significantly."

The greenback saw little movement against a basket of currencies on December 29, rising from a five-month low of 100.61 on the previous day. This year, it is expected to lose 2.23%.

With a 0.07% increase, the euro closed at $1.1069, somewhat below the five-month high of $1.11395 set on December 28. It is expected to finish the year with a gain of 3.31%, marking its first gain since 2020.

According to Niels Christensen, chief analyst at Nordea, "markets plan to bring the US to cut first and are less comfortable that the European Central Bank will do so so soon, so the dollar is very soft."

"An other factor hurting the currency is our strong risk appetite. A soft dollar will be discussed at the March central bank meetings starting in 2024, according to Christensen.

In their policy meetings this month, policymakers at the BOE and ECB did not make any mention of potential rate reduction. However, traders are projecting 161 basis points of rate cuts by the ECB in the next year, with two cuts most probable by April. In 2024, BofE is predicted to reduce rates by 148 bps as well.

According to CJ Cowan, portfolio manager at Quilter Investors, "the market may have moved very quickly, but growth has been slow in the US and globally, as well as negligible in Europe." "Inflation is falling."

"The ECB is famously slow for altering policy course, so almost two cuts by April seem rough, even though it may be the right thing to do."

At $1.2733, sterling hardly moved during the day and was expected to gain 5.29% annually, which would be a record high since 2017.

Yan is an outside entity.

As the Japanese currency continues to be pressured by the Bank of Japan's (BOJ) exceptionally loose monetary policy stance, the dollar is anticipated to gain 7.91% versus the yen.

The BOJ is expected by the market to exit negative interest rates in 2024, but the central bank has maintained its dovish posture and provided few hints as to whether or not such a scenario may materialize.

Adish Kumar, an international economist at T. Rowe Price, said, "The situation for Japan is encouraging, with expectations of significant economic growth in 2024 and a reduction in inflation that shows signs of being sustainable."

Nevertheless, rates will still be much lower than in the US even if the BOJ boosts them into positive territory.

It is very costly to keep the yen. "For the entirety of 2024, I would be surprised if they were provided a positive 50 basis points, but that probably happens," Jefferies-Bechtel said. "Even if the Fed gives us three rate cuts, you're perpetually looking at an interest rate differential of about 4.5% or so."

The yen is a widely used financing currency, and investors purchase other assets with the money they make by shorting the yen.

Bitcoin reached $42,922 up 0.8%. It is expected to increase by 159% this year.

,

bid price in currency at 10:00 a.m. (1500 GMT)

Synopsis Final U.S. Close for RIC YTD PCT High Bid Low Bid PCT Change

final modification

Meeting

Dollar Index: 101.1800 + 101.4200 + 101.0900 -0.01% -2.232%

$1.1069 $1.1062 +0.07% +3.31% +$1.1084 +$1.1044 in euros

Currency/Yen 141.4700 141.4050 +0.05% +7.91% +141.9100 +141.1500 =

EUR/JPY 156.61 + 0.12% + 11.63% + 156.9200 + 156.2800

Swiss Franc/Dollar -0.82% -9.39% +0.8 446 +0.8357 = 0.8378 0.8448

$1.2733 $1.2735 -0.01% +5.29% +$1.2772 +$1.2702 in sterling

US dollar to Canadian dollar 1.3223 -0.04% -2.40% 1.3229 1.3222 + 1.3265-22665

Australian dollars to US dollars $0.6817 $0.6829 -0.18% +0.01% +$0.6846 +$0.6782

Swiss/Euro 0.9273 0.9342 +0.9347 +0.9255 -0.74% -6.29%

Sterling to Euro 0.8691 0.8686 +0.06% -1.73% +0.8701 +0.8669

Brand-New Zealand $0.6333 -0.01% -0.28% + $0.6359 + $0.6306 $0.6333

dollar for dollar

Norway/dollar 10.1260 10.2060 (-0.74% + 3.22% + 10.1990 + 10.1300).

Norway/Europe 11.2122 11.2899 +11.1950 -0.60% +6.85%

US dollar versus Swedish krona 9.9876 +0.71% -3.43% +10.0612 +9.9688 10.0510

Sweden and Europe 11.0484 + 0.71% -0.20% + 11.1295 + 11.0395 11.1269