ALBAWABA – The US dollar slipped further on Tuesday, having already slipped to the lowest level in months a day before, on optimism that the United States (US) Federal Reserve (Fed) is done hiking US interest rates for now.
As the tumultuous year nears its end, emerging-market (EM) currencies are poised for their best performance since 2017 on a late rally of investors racing to lock in higher yields, while they still can.
The benchmark MSCI EM Currency Index advanced 0.3 percent on Tuesday, lifting its gains this year to 3.4 percent, according to Bloomberg.
On the other hand, the US dollar slipped against a basket of major currencies, with Bloomberg’s dollar index spot falling 0.09 percent, by 0226 Amman time, to 103.3480.
The weakening dollar gave more leeway for emerging currencies to make significant gains, with the Fed likely to pin US interest rates for now.
The rebound began in early October, as improving US inflation data sparked hopes for an end to the Fed’s cycle of hikes and a potential cut as soon as mid-2024.
The currencies of Poland and Hungary have been the stars of the rebound, with elections in Warsaw returning a pro-European Union parliament and a fiscally prudent alliance to power.
The Polish zloty pushed higher on the results of the Polish elections as inflation eased for the Hungarian central bank supporting the forint.
Policymakers in Budapest are set to cut the key interest rate by 75 basis points to 11.5 percent on Tuesday and continue at that pace through February, according to Deputy Governor Barnabas Virag.
The US dollar slipped to its lowest level in months - Shutterstock
Globally, markets are holding for the release of the Fed’s minutes of the meeting later today, according to Agence France-Presse (AFP). The minutes will help pain a clearer picture of the US central bank’s intentions in regards to US interest rates.
The dollar hit its lowest level since mid-September at 147.16 yen and was last down 0.61 percent at 147.45, according to Reuters.
More broadly, the dollar index , a gauge of the greenback against six other currencies, fell to its lowest since late August at 103.17, the Canada-based news agency reported. The US dollar was reportedly 0.13 percent weaker at 103.32.
US yields have tumbled as investors wagered on interest rate cuts next year, after the slowdown in US inflation in October. This dragged the dollar index down from an almost one-year high at the start of October, as reported by Reuters.
The 10-year US Treasury yield fell for a fourth session running on Tuesday to 4.39 percent. Having fallen on Monday in the wake of a solid auction of 20-year bonds, from a 16-year high of above 5 percent just last month.
The euro rose to its highest since mid-August at $1.0966 on Tuesday and was last reported at $1.0944, according to Reuters, and the Chinese Yuan also rose on Monday.
The Sterling was also up 0.2 percent at $1.253, after hitting a two-month high of $1.254, as Bank of England Governor Andrew Bailey on Monday said it's "far too early to be thinking about rate cuts”.
