SINGAPORE- The dollar was rooted near a three-month low on Thursday and was set to post its steepest monthly decline in a year as investors ramped up bets that the Federal Reserve is done with rate hikes ahead of a crucial inflation report later in the day.
The dollar index which measures US currency against six rivals, eased 0.058 percent to 102.74, not far from 102.46 – its lowest since Aug. 10 it touched on Wednesday.
The index is down 3.7 percent in November on growing expectations the Fed will cut interest rates in the first half of 2024.
The dollar clawed back some of its losses on Wednesday after data showed the US economy grew faster in the third quarter than initially reported.
“I think it’s still pretty much all about US yields. And by extension FOMC policy,” said Carol Kong, currency strategist at Commonwealth Bank of Australia.
“Markets will continue to focus on what FOMC officials say about the prospect of the upcoming rate-hike cycle.”
Investors will be all ears on Friday when Fed Chair Jerome Powell takes the center stage in the wake of Fed Governor Christopher Waller on Tuesday flagging a possible rate cut in the months ahead.
But before that, the spotlight will firmly be on Thursday’s crucial personal consumption expenditure (PCE) price index – the Fed’s preferred measure of inflation.
Christopher Wong, currency strategist at OCBC, said the data will offer a glimpse into whether the disinflation trend seen so far remains intact.
“If core PCE undershoots expectations to the downside, then USD may extend the move lower again.”
