The U.S. dollar slid to its weakest level since June, dropping about 0.8% this week, as investors wait for key U.S. economic reports in January.
What Happened to the Dollar?
The Bloomberg Dollar Spot Index fell 0.8% this week, adding up to an 8% decline for the year – the steepest annual slide since 2017. Risk‑friendly currencies such as the Australian dollar and Norway’s krone rose against the greenback.
Why the Dollar Fell
Traders say thin market liquidity and expectations of more Federal Reserve rate cuts pushed the dollar lower. A recent jobs report showed unemployment rising to its highest level since 2021, while inflation numbers came in below forecasts.
Key U.S. Data Coming Up
Investors are focused on two major releases in early January:
- December jobs report – will confirm if the labor market is weakening.
- Consumer inflation figures – will guide the Fed’s next moves on interest rates.
The Fed cut rates for the third straight meeting in December, and most market participants think it will hold steady next month but may cut again later in the year.
Impact on Markets
U.S. Treasury yields also slipped, with the 10‑year note falling to about 4.13%. A bearish options gauge shows traders expect the dollar to stay weak for at least five days.
Takeaway
While the dollar’s slide adds a boost to riskier assets, the direction of U.S. monetary policy will likely hinge on the upcoming jobs and inflation numbers. Keep an eye on those reports for clues about future rate cuts.
Remember, this is just perspective, not a prediction. Do your own research before making any investment decisions.