The dollar attempted to stabilize on Tuesday in thin trading due to holidays, under pressure amid signs that inflation in the world’s largest economy is easing. This development is expected to give the Federal Reserve flexibility to ease interest rates next year. Meanwhile, the yen stabilized near its highest level in the past five months amid expectations that the Bank of Japan may soon end its ultra-easy policy. For most of 2022 and 2023, this policy kept the Japanese currency under pressure as other major central banks began raising interest rates.
Dollar movements were largely subdued on the day following Christmas, as markets in the United Kingdom, Australia, New Zealand, Hong Kong, and other countries remained on official holidays. Data released on Friday showed a decline in U.S. prices in November compared to the previous month for the first time in over three and a half years, with the annual inflation increase dropping to less than 3%. This reinforced market expectations of a Federal Reserve interest rate cut.
The reading came a week after policymakers at the Federal Reserve opened the door to interest rate cuts in 2024 at the central bank’s last policy meeting of the year, a move that led to a decline in the dollar. A series of data released on Tuesday showed that the unemployment rate in Japan remained unchanged at 2.5% in November compared to the previous month, while services inflation among companies remained steady at 2.3% last month.
The Chinese yuan declined against the U.S. dollar amid growing expectations of further monetary easing measures from Beijing. Five of China’s largest state-owned banks lowered interest rates on some deposits at the end of last week, marking the third round of such cuts this year. The official Shanghai Securities News reported on Tuesday that many listed banks had taken this course of action.
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Shady Fouad is a technical analyst at LDN Company
Shady's strategic vision in the currency markets is reinforced by more than fifteen years of trading experience, which enables him to blend economic and technical analyzes with high efficiency, and find the best investment ideas for traders.
