NEW YORK- The US dollar index posted its first weekly fall in 2024 on Friday as investors took a breather from buying the currency following an almost two-month rally built on expectations that the Federal Reserve will begin cutting rates later than previously expected.
Investors have pushed back expectations for the first Fed rate cut to June, from May, and dramatically reduced how far they see the US central bank cutting its benchmark rate. Fed officials have projected three 25 basis point cuts this year, while markets had priced for as many as seven.
“The dollar’s rally this year has been predicated on the markets converging back to the Fed,” said Marc Chandler, chief market strategist at Bannockburn Global Forex in New York.
Traders may also be pricing for the likelihood that economic data will begin to slow.
“I think starting with the February jobs data, which is due March 8, we’re going to begin seeing a series of weaker US economic data,” Chandler said.
Personal Consumption Expenditures (PCE) due next week may also provide clues for Fed policy.
New York Fed President John Williams sees the US central bank on track for interest-rate cuts “later this year,” despite stronger-than-expected readings on inflation and the labor market in January, according to an interview published Friday by Axios.
The dollar index was little changed on the day on Friday at 103.93 and on track for a weekly loss of 0.34 percent . It has bounced from a five-month low of 100.61 on Dec. 28 and is holding below a three-month high of 104.97 reached on Feb. 14. – Reuters
