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The dollar is poised for its sharpest annual retreat in eight years and investors say more declines are coming if the next Federal Reserve chief opts for deeper interest-rate cuts as expected.
The Bloomberg Dollar Spot Index has fallen about 8% this year so far. After tumbling in the wake of Donald Trump’s “Liberation Day” tariffs in April, the greenback came under sustained pressure as the president kicked off his aggressive campaign to get a dovish appointee installed as Fed chair next year.
“The biggest factor for the dollar in first quarter will be the Fed,” said Yusuke Miyairi, a foreign-exchange strategist at Nomura. “And it’s not just the meetings in January and March, but who will be the Fed Chair after Jerome Powell ends his term.”
With at least two rate reductions priced in for next year, the US’s policy path diverges from some of its developed peers, further dimming the dollar’s appeal.
The euro has surged against the greenback as benign inflation and a coming wave of European defense spending keep rate-cut bets close to zero. In Canada, Sweden and Australia, meanwhile, rates traders are wagering on hikes.
The dollar gauge rose as much as 0.2% Wednesday after Labor Department data showed applications for US unemployment benefits fell last week to one of the Read Entire Article
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