Dollar Declines As Traders Anticipate Fed Rate Cut

According to Odaily, the US dollar weakened during the Asian trading session on Monday as traders increasingly bet on a 50 basis point rate cut by the Federal Reserve this week. This decline in the dollar boosted major currencies like the yen, which reached its highest level since July 2023. The debate over whether the Federal Reserve will initiate its easing policy with a 25 or 50 basis point rate cut has persisted for weeks. Traders are now leaning towards the latter option. Futures prices linked to the Fed's rate decision this week indicate a roughly 58% chance of a 50 basis point cut, compared to an even split in predictions late last Friday. Rodrigo Catril, a strategist at National Australia Bank, commented, 'We believe the Federal Reserve is about to enter a new easing cycle, which is a significant negative factor for the dollar. As the Fed eases monetary policy next year, lowering the funds rate to neutral or even below neutral levels, the dollar will begin a cyclical decline.'