Major global currencies, including the dollar, stabilized early Monday. Investors are preparing for the US dollar to continue its decline since late last week after the Federal Reserve eased its aggressive tone.
USD index fluctuations
The US dollar index settled at 105.07, while the euro recorded $1.0727. The index fell more than 1 percent last week, its largest decline since mid-July.
However, global stocks had their strongest week in a year. That is due to growing expectations that the Federal Reserve had completed raising interest rates.
In addition, weak US jobs data, feeble global manufacturing numbers, and lower longer-term treasury yields also weighed the dollar down. Meanwhile, gains were recorded for the British pound and Australian dollar. However, the dollar decreased against the yen reaching 150 yen per dollar.
Downward trend
“We always say bad news is good news,” said Tina Ting, market analyst at CMC Markets in Auckland. “It is good that the Fed and other central banks are expected to end the cycle of raising interest rates sooner.”
She expected the dollar to remain in a downward trend during the month of November.
Cautious anticipation
On the other hand, analysts at JP Morgan seemed cautious about securities.
“It would be helpful for dollar bears to tone down their enthusiasm. That is because the strong pillars of the US dollar have diminished, but not completely disappeared. They are likely to eventually emerge again in the medium term as supportive factors for the US dollar” they wrote.
Moreover, with more evidence of a slowdown in the US economy, JP Morgan analysts say that “the continued dollar sell-off needs signs of improvement in the eurozone, China, and other regions that remain fragile.”
Read: Gold prices soar as investors seek safe haven
Federal Reserve agreement
Earlier, Federal Reserve officials agreed that smaller interest rate increases should happen soon. This will allow the evaluation of the impact of policy on the economy.
The Reserve Board’s minutes strengthened Wall Street’s position. The major indices closed higher, while the dollar continued its losses against the euro and the yen.
The meeting summary, which reflects statements made by several officials, pointed to smaller interest rate increases coming.
Markets widely expect the Federal Open Market Committee to step down to a 0.5 percent increase in December. That is after four consecutive increases of 0.75 percent.
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