Dollar under pressure on rate cut wagers amid bleak holiday market

US dollar was under pressure on Wednesday while European Union’s euro edged a a four month peak on back of expectations that Federal Reserve would cut interest rates soon.

With thin year-end flows keeping movements limited and trers out for holidays globally until New Year, last week of year is likely to see muted volumes.

dollar index, which measures US currency against Euro, Swiss franc, Japanese yen, Canian dollar, British pound, and Swedish krona, was at 101.54, nearing a five month low of 101.42 which it alrey touched last week.

index is on course for a 1.9 per cent drop in 2023 after two straight years of strong gains on back of Fed hiking rates to battle inflation.

recent weakness in dollar is due to markets anticipating rate cuts from Fed next year, denting appeal of greenback.

Markets are w pricing in a 79 per cent chance of a rate cut in March 2024 and 153 basis points of cuts priced in for next year, CME FedWatch tool suggested.

"With little to speak of on ecomic calendar for this week between global holidays, we do t expect a large swing in pricing to wrap up this calendar year," said analysts at Monex USA.

Liquidity across world will remain quite thin as several offices remain closed, which could give us some choppiness in markets, analysts ded, saying that week is expected to remain “fairly uneventful.”

euro was down 0.07 per cent to $1.1034, having touched a four month high of $1.1045 on Tuesday.

currency is up nearly 3 per cent in year and on course for a third straight month of gains, on lines of its run last year.

Japanese yen weakened 0.17 per cent to 142.64 per dollar and is heed for a 8 per cent drop in year.

Asian currency has, however, witnessed a bout of strength in recent weeks as trers wr that Bank of Japan will soon exit its ultra-loose policy.

Australian dollar and New Zealand dollar both touched a fresh five month peak but were down a touch in early tring. Aussie last bought $0.6822, while kiwi was at $0.6321.

(With Reuters Inputs)