Global dollar remains at one-year lows awaiting Fed cut

He global dollar fell to near its lowest levels of the year in the run-up to what is expected to be the start of the flexibilization cycle of monetary policy in USA, hand in hand with the first interest rate cut by the Federal Reserve (Fed); and while operators are mostly betting on a 50 basis point drop.

The Fed A new meeting of the Federal Open Market Committee (FOMC) which will almost certainly define the first rate cut and the beginning of a relaxation of monetary policy, until now firmly contractionary to control the inflation. Employment data and the increasingly persistent risk that the US economy enters a recession recession —together with a relatively stable price trend, although still somewhat above the objectives—, led the monetary authorities to be unable to delay the change of trend any longer.

For this reason, the dollar index —which measures the performance of the greenback against a basket of six internationally important currencies— remained at around 100.7 units, close to its lowest level in the last 52 weeks: 100.51 units.

The federal funds futures have rallied to raise the chance of a 50 basis point rate cut to 65%, up from 30% a week ago. The odds have been sharply reduced after media reports revived the prospect of a 50 basis point rate cut. more aggressive easing“Any sign of weakness (in Tuesday’s U.S. economic data) will only reinforce market speculation that there could be a 50-basis-point move,” he told Reuters. Jane Foley, Senior FX Strategist at Rabobank.

Also expected on Tuesday afternoon are the figures for retail sales and industrial production for August in the United States, although all eyes are on the two-day meeting of the Fed which ends on Wednesday.

“Regardless of which of the two steps, -25bps or -50bps, you choose on Wednesday, we believe that the message of the Fed will be ‘moderate'”, said the strategists of Macquarie in a note to customers. “The dollar could weaken against the major currencies in a very dovish tone, even with a -25 basis point cut (…) the biggest losses, if any, are likely to be experienced against the yen,” they explained, adding: “This is because the contrast between central bank outlooks will remain more marked between the Fed and the BOXWOOD, for now”.

In this sense, it is expected that the Bank of Japan The Fed will hold monetary policy steady on Friday but signal further interest rate increases, possibly making the next meeting in October a busy one.

In Uruguay, the dollar is once again approaching the $41 mark

In Uruguay, Meanwhile, the dollar rose 0.46% compared to Friday, closing at 40.956 pesos in the interbank quote. Central Bank (BCU), opening the week on the rise and partially recovering from its previous fall to be on the verge of returning to the 41 pesos range.

The US currency has now accumulated a monthly variation of 1.54% and an annual variation of 4.96%, since its price is 1.93 pesos above the one registered after the closing of the last exchange day of last year.