“The dollar index is trading towards the lower end of its recent trading range, suggesting some vulnerability to further weakness,” said Scotiabank analyst Shaun Osborne.
“We think the broader dollar rally will struggle to extend significantly, but losses are likely to remain limited unless or until a more significant bearish catalyst emerges.”
Against its rivals, the dollar fell 0.2% to 103.86. Earlier in the month, it hit 105.79, its highest since late 2002.
Although concerns about slowing growth have weighed on sentiment, lower inflation expectations, mainly through falling commodity prices, have also eased pressure to hike rates.
For example, copper is on track for its biggest monthly decline since the pandemic-driven selloff of March 2020. Oil prices will post a monthly decline for the first time this year.
The drop in commodity prices has weighed on expectations of how high US interest rates will go next year. Rising interest rates have been a key support for the dollar, but that source of strength has faded in recent days.
Futures show that traders now expect the US Federal Reserve benchmark interest rate to stabilize around 3.5% from March next year, down from the 4% expected. previously for 2023.
“Generally speaking, markets have priced in a lower and earlier final interest rate from the Federal Reserve, which is reducing the attractiveness of the dollar from a yield spread standpoint,” said Simon Harvey, chief of currency analysis of Monex Europe.
The euro led the gains against the dollar at the start of the annual forum of the European Central Bank in Sintra, which was attended by the president of the ECB, Christine Lagardeand the chairman of the Federal Reserve, Jerome Powell.
The euro was up 0.2% at $1.0580.
Cryptocurrencies consolidated their gains, with the world’s largest cryptocurrency Bitcoin rising 1.4% to $21,170.88, after falling as low as $17,588.88 earlier in the month.
Source: Ambito
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