US dollar posts first annual loss since 2020
The U.S. dollar rose during trade in the final days of the year, but not enough to erase the greenback's first annual loss against a group of major currencies since 2020, as market expectations were dominated by the Federal Reserve (U.S. central bank). Interest rates will be reduced by the end of the first quarter of the year.
The US currency is currently under pressure due to expectations of a further rate cut early next year, but timing is in the hands of the US Federal Reserve, which will avoid tightening monetary policy too much as inflation declines. or because of the slowdown in US economic growth.
Since the world's largest central bank began its move to tighten monetary policy, expectations regarding the extent of interest rate hikes in the first quarter of 2022 have been the primary driver for the dollar.
But with the frequency of economic data indicating that inflation in the US has continued to decline, investors' attention has shifted to when the central bank will begin its easing process, with interest rates being cut at the forefront.
After the central bank's monetary policy easing trend at the meeting, these expectations gained momentum, as investors and analysts understood from the words of Federal Reserve Chairman Jerome Powell, in a press conference following the announcement of the stability of the bank's interest rates, about two and a half weeks ago.
The dollar rose 0.10% to 101.33 against a basket of currencies in silver trading, having risen from a five-month low of 100.61 on Thursday. However, the dollar index posted a loss of 2.11% for the year and 4.56% for the current quarter, its worst performance in a year.
The euro fell 0.20% to $1.1039, below a five-month high of $1.11395 hit on Thursday. The euro has gained about 3% against the dollar this year, its first positive year since 2020.
The British pound was up 0.02% at US$1.2732, marking a year-to-date gain of about 5.4% against the dollar, its best performance since 2017.
The dollar posted a 7.56% annual gain against the Japanese yen as the Japanese currency is still under pressure from the ultra-loose monetary policy adopted by the Bank of Japan (BoJ).
The Swiss franc was one of the best performing currencies this year as the US currency lost 8.99% against it, its worst decline since 2010.
(Reuters, Al-Arabi Al-Jadeed)