TOKYO- The US dollar ticked down to a three-month low against peer currencies on Tuesday after slipping overnight on weaker-than-expected new home sales data, while traders hunkered down on bets that the Federal Reserve could start cutting interest rates in the first half of next year.
US new home sales fell 5.6 percent to a seasonally adjusted annual rate of 679,000 units in October, data showed, below the 723,000 units expected by economists polled by Reuters and sending Treasury yields into a decline.
The dollar index a measure of the greenback against a basket of currencies, was last at 103.16, hanging around its lowest since Aug. 31. The dollar was track for a loss of more than 3 percent in November, its worst performance in a year.
Market expectation that the Fed’s rate increase cycle has finally come to an end has also put downward pressure on the greenback. US rate futures showed about a 25 percent chance that the Fed could begin cutting rates as early as March and increasing to nearly 45 percent by May, according to the CME FedWatch tool.
“Slowing growth momentum, peak rates, rate cuts next year, and unwinding of long positioning: it’s the dynamic feeding a weaker US dollar and driving the entire currency complex,” said Kyle Rodda, senior financial market analyst at Capital.com.
“Anything that brings that trend into question will change the outlook; however, the bar for that to happen is high,” he added, saying the dollar likely has more room to fall.
Traders are now eyeing US core personal consumption expenditures (PCE) price index – the Fed’s preferred measure of inflation – this week for more confirmation that inflation in the world’s largest economy is slowing. – Reuters
