The US Dollar Has Reached a Two-Week High

(CTN News) – On Wednesday, the US Dollar (USD) reached its highest point in two weeks, while the euro experienced weakness across the board. This was due to increasing speculation in the market that the European Central Bank (ECB) will implement interest rate cuts as early as March.

Against the dollar, the euro declined by 0.2% and reached a three-week low of $1.0773. This downward trend in the euro can be attributed to lower rate expectations following disappointing economic data and cautious statements from the central bank.

Furthermore, the euro also reached a three-month low against the pound, a five-week low against the yen, and a 6-1/2 week low against the Swiss franc. This overall decline in the euro has been the main focus in currency markets, according to Niels Christensen, the chief analyst at Nordea.

Christensen also highlighted that the recent comments made by ECB policymaker Isabel Schnabel have further supported the market’s anticipation of early rate cuts. Schnabel stated that considering the “remarkable” decrease in inflation, the possibility of further interest rate hikes may be eliminated.

Overall, the US Dollar has strengthened while the euro has faced challenges, primarily due to expectations of rate cuts and cautious remarks from ECB officials.

The ECB is likely to cut interest rates in March, with an 85% chance of a 150 basis point reduction by the end of the following year. The Fed and Bank of England are expected to keep rates unchanged, with the Fed focusing on updated projections for rates in 2024.

There is a 60% chance of a rate cut by the Fed in March, with at least 125 basis points of cuts expected next year. Recent reassessments of rate cuts in the US have strengthened the dollar, leading some to believe that markets have been too aggressive in pricing in rate cuts for next year.

Mitra suggests that if the Federal Reserve emphasizes no rate cuts shortly, the market could rebound. However, even if rate cuts happen in Q2, they may not be as significant as desired.

A Reuters poll predicts that the anticipated rate cuts will weaken the dollar against other G10 currencies next year. Currently,

The dollar index is slightly up at 104.07.

Moody’s downgrade of China’s credit outlook caused the offshore Chinese yuan to increase by 0.1% to $7.1694 per dollar. The spot yuan rate opened at 7.1570 per dollar and is currently trading at 7.1585.

China’s state-owned banks aggressively sold US dollars after Moody’s statement, continuing into Wednesday. The Japanese yen declined 0.1% against the dollar, while the Australian and New Zealand dollars rose 0.3% and 0.4% respectively.

Bitcoin decreased 0.3% to $43,940 after briefly surpassing $44,000. This year, bitcoin has increased 150% in value, driven by optimism for US regulatory approval of bitcoin ETFs.

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