Bloomberg: 2023 is the worst year for the dollar since the pandemic
* Fed policy is expected to ease and the dollar will depreciate. This hurts its attractiveness – central banks in other countries are likely to keep interest rates high for longer.
Bloomberg writes that the outgoing year of 2023 will be the worst year for the dollar since the start of the coronavirus pandemic in 2020. This trend is likely to continue - the US expects the Fed to cut interest rates, which will affect the attractiveness of the US dollar.
The agency's dollar index has fallen nearly 3% this year, the biggest drop since 2020. The Fed will ease policy in 2024 due to the slowdown in the U.S. economy, and this contraction will occur mainly in the fourth quarter. As the agency explains, this reduces the attractiveness of the US dollar, as central banks around the world can keep interest rates high for longer.
Fed interest rates remain on pause. What will happen to the economy and oil prices
Experts from the Japanese market risk consulting firm believe that the dollar is expected to strengthen before the United States *** in November 2024, but the appearance of Donald Trump in the candidate could provoke political turmoil and currency volatility.
Markets are ready for the Goldilocks scenario, where the Fed cuts interest rates just enough to stimulate the economy without adding to inflationary pressures. This determines the dynamics of the US dollar," said Amanda Sundstr M, fixed income and FX strategist at SEB AB in Stockholm.
The Goldilocks period is characterized by a state in which economic growth neither accelerates excessively nor slows excessively. The economy is growing fast enough to prevent a recession, but not so fast that inflation accelerates too much. In this state, low inflation, low unemployment, and low interest rates are established, and GDP and asset values are steadily rising.
In mid-December, the Fed again kept interest rates at 525% to 55% unchanged. This was the third meeting in a row, after which the regulator did not raise interest rates. "Inflation has come down from its highs, and unemployment has not risen significantly. This is very good news," said Jerome Powell, the head of the regulator. Against this backdrop, the US dollar has weakened markedly in global markets. The U.S. dollar index (DXY) fell last week to its lowest level since August this year. As of the end of the week, the index was **134% to 10259 points. In trading on Monday, December 18, the U.S. dollar index immediately again ** 017%, to 10242 points.
Bloomberg writes that after the Fed meeting, hedges and other large players began betting on the dollar against other currencies. Goldman Sachs analysts, like other experts, expect the dollar to be **.
In November, rating agency Moody's downgraded the outlook for U.S. credit ratings to negative from stable. "This is a decision that I disagree with," Treasury Secretary Janet Yellen responded, emphasizing that the U.S. economy remains strong and that U.S. Treasuries are safe and liquid assets.
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