According to Yahoo News, the dollar was near a two-week high against a basket of currencies on Wednesday as investors assessed U.S. economic data that showed a cooling labor market, while wagering the Federal Reserve will cut rates next year. The dollar index, which measures the U.S. currency against six rivals, was 0.019% higher at 103.99, having climbed 0.3% overnight. The index is up 0.5% this month, after sliding 3% in November, its steepest monthly decline in a year.
Data on Tuesday showed U.S. job openings fell to more than a 2-1/2-year low in October, the strongest sign yet that higher interest rates were dampening demand for workers. Data also showed there were 1.34 vacancies for every unemployed person in October, the lowest since August 2021. The focus will now shift to the Friday release of the November jobs report to provide clues on the strength of the economy ahead of the Fed's policy meeting next week.
Traders have priced in a 99.7% chance of the Fed standing pat next week but a 56% chance of the central bank cutting rates in March, according to CME's FedWatch tool. ANZ analysts forecast conditions for the Fed to start cutting interest rates will emerge around the middle of 2024 but cautioned Chair Jerome Powell will need to maintain hawkish guidance during the transition to lower growth and inflation. The widely expected rate cuts in 2024 will result in the dollar loosening its grip on other G10 currencies next year, dimming the outlook for the greenback, according to Reuters poll of foreign exchange strategists.
