The U.S. dollar sank to its weakest level since July against a basket of currencies on Wednesday, as traders increased bets that the Federal Reserve could cut interest rates in 2023 following a surprisingly dovish tone at December’s meeting.
The dollar index dropped 0.61% to 100.92, putting it on pace for a 2.5% decline this year after two years of gains.
The euro rallied 0.54% to $1.1103, its highest since July, headed for a 3.61% annual advance. The dollar also ceded ground to the Aussie and Kiwi dollars. Still, it managed a 0.16% gain to 142.64 Japanese yen, on track for an 8.78% yearly rise amid indications from the Bank of Japan it could end negative interest rates within months.
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Gold advances on rate-cut bets
With many traders still away for the holidays, volumes are expected to stay low until the New Year. The motivation behind any Fed cuts will be key – whether from lower inflation or weakness in growth. More hawkish stances at the ECB and BOJ have also pressured the greenback.
