Today, Friday, the US dollar fell to its lowest level in more than two months, for the fourth consecutive day.
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According to analysts, the reason for this decline is the investors’ belief that most of the latest scenarios from the US central bank have already been priced in.
They note that placing hedge funds near their highest levels since early 2020 and final pricing of interest rates in the US point to peak rates at less than 2%, well below the high levels of previous Fed rate cycles.
While it is expected to weaken 1.11%, its largest decline since last December 2020, it fell on Thursday, to below the 100-day moving average for the first time since June 2021.
In other words, the market is not sure whether this is good or bad for the US dollar, they said.
Against its rivals, the dollar’s losses were more pronounced against the Japanese yen and the Chinese yuan, falling against them by 0.4% and 0.3%, respectively.
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While the safe-haven yen has benefited from weak global stocks, the Bank of Japan is deliberating on how to eventually start raising interest rates, which lowered the yields of the Australian dollar and the US Treasury, which also affected the dollar.
But long-term yields have been dented slightly by hawkish comments from Fed officials about the bank’s balance sheet cut, with Fed Fund futures indicating that US interest rates will peak by mid-2023.
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