The US dollar is weakening against a basket of currencies at the start of the new week. Expectations are growing in the market that the US central bank (Fed) could move to cut interest rates significantly later this week.
The dollar index fell
At around 18:30 CET, the dollar index, which tracks the dollar’s performance against a basket of six leading world currencies, was down 0.4 percent to 100.75 points. The euro strengthened 0.4 percent against the dollar to $1.1127. The dollar to yen exchange rate was around JPY140.77, around the previous session’s close, as the dollar fell to a one-year low of JPY139.58 during Asian trading. The euro rose 0.4 percent against the yen to JPY156.60.
The Fed’s two-day monetary policy committee meeting begins on Tuesday. The Fed is expected to announce an interest rate cut of at least a quarter percentage point on Wednesday. However, reports in The Wall Street Journal and Financial Times last week have sparked speculation that the Fed could cut interest rates by as much as half a percentage point. Markets now give a higher interest rate cut a chance of up to 61 percent, up from just 15 percent last week.
Interest rate cuts
The Bank of Japan also meets on Friday. It is not expected to change interest rates, having already raised them twice this year.
The European Central Bank (ECB) also cut interest rates last week. However, ECB President Christine Lagarde dampened expectations of further interest rate cuts next month. ECB Governing Council member Peter Kažimir said today that the ECB should almost certainly wait until December to cut interest rates further to make sure it does not cut too quickly, Reuters reported.
source: ČTK
