The dollar declined against most currencies after weak U.S. retail sales data was released overnight, which boosted expectations that the Federal Reserve may cut interest rates. Ipek Ozkardeskaya, Senior Analyst at Swissquote, noted that U.S. consumer spending might actually be slowing down this time. She explained that massive investments in artificial intelligence will continue to support growth, but they may not necessarily translate into net new jobs. She added that if this divergence in the pace of growth within the U.S. economy persists, it could require support from the Federal Reserve to improve conditions. This explains the decline in the two-year Treasury yield the most sensitive to monetary policy expectations to its lowest level in three and a half years, alongside the weakness in the U.S. dollar. The U.S. Dollar Index (ICE) fell by 0.2% to 96.59 points.
On the other hand, the Reserve Bank of Australia’s hawkish shift earlier this month strengthened the Australian dollar’s position as one of the key high-yielding currencies, according to a report from LGT Private Banking Asia’s investment strategies and advisory solutions group. The report highlighted that this shift enhances the appeal of the currency’s yield, likely increasing demand for carry trade strategies and hedging activities from local investors. It also predicted that Australia’s pivotal role in global commodity supply chains, along with its reduced reliance on China and strong financial position, would add a premium to its assets. The bank raised its 12-month forecast for the Australian dollar against the U.S. dollar to 0.7400 from 0.6900, with the pair rising by 0.5% to 0.7113.
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