The dollar recorded its second-largest weekly decline against major currencies this year on Friday, while the yen sharply rose, trading below 150 yen amid increasing concerns about the global economic outlook. Weaker-than-expected U.S. inflation data on Tuesday and Wednesday accelerated market expectations of the Federal Reserve’s interest rate cuts. This move could undermine strong support for the dollar and may occur in early next year’s first quarter.
The dollar index, which measures the U.S. currency against six other major currencies, fell to its lowest levels last seen on September 1, while the yield on 10-year Treasury bonds dropped to its lowest level in two months at 4.379%. Data showed that U.S. housing construction rose slightly in October, supporting the dollar. However, with inflation being the main market driver, the dollar remained low during Friday’s trading.
The dollar index fell to a low of 103.85, leading to a roughly 1.8% decline over the past five days – its largest weekly drop since mid-July. The euro rose to $1.0908 after Eurostat confirmed a sharp slowdown in annual inflation in the Eurozone in October. The yen, which has been broadly affected this year by the strength of the dollar, broke the 150-yen level for the first time in about two weeks, rising to 149.68yen per dollar. Japanese Deputy Finance Minister Ryusuke Akazawa told parliament on Friday that Japanese authorities do not have specific exchange rate levels in mind when deciding when to intervene in the currency market.Slower-than-expected retail sales figures in the UK added to a series of negative readings this week, but the British pound rose to $1.2458.
Slow global economic indicators have raised concerns, but they also suggest that central banks may be winning their battle against inflation.Futures markets priced in 93 basis points of cuts in the overnight lending rate from the Federal Reserve by December 2024, Financial markets also priced in nearly a 100 basis point reduction in interest rates in the Eurozone next year. However, policymakers at the European Central Bank, Robert Holzmann and Joachim Nagel, said on Friday that the European Union should be ready to raise interest rates again if necessary.
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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.
