US Dollar Weakens On Rate Cut Expectations, Australian Dollar Remains Strong Before Inflation Data.

(CTN News) – The dollar fell against the yen to its lowest point in over two months and remained near a three-month low against other major currencies.

This is due to speculation that the Federal Reserve may reduce interest rates early next year. Meanwhile, the Australian dollar stayed strong near a four-month high and the New Zealand reached a peak in early Asian trading.

Later in the day, the market will be watching for Australian inflation data and a rate decision from the Reserve Bank of New Zealand.

The drop in the dollar was caused by comments from Fed Governor Christopher Waller, who suggested a possible rate cut in the future.

Kyle Rodda, senior financial market analyst at Capital.com, noted that if the historically hawkish attitude of the individual in question is becoming more dovish, it could indicate a general consensus among board members that interest rates have reached their peak and may even be cut next year.

According to the CME FedWatch tool, market pricing currently suggests a 40% chance that the Federal Reserve could begin easing monetary policy as early as next March, compared to a 22% chance just a day ago.

The US dollar, measured against a basket of currencies, has fallen to a three-month low of 102.60.

In November, the dollar index is on track for a nearly 4% loss, marking its worst monthly performance in a year.

Economists at Wells Fargo have expressed a less optimistic view on the prospects for the US dollar, citing progress in reducing US inflation as a factor that increases the likelihood of earlier rather than later Federal Reserve easing.

The US economy’s resilience is expected to reduce short-term gains of the US dollar. Sterling remains close to its previous high at $1.27105.

The Australian dollar increased by 0.1% to $0.6656, near its four-month peak of $0.6666. Traders are focusing on an upcoming inflation report that will determine if the Reserve Bank of Australia will implement further interest rate hikes.

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