Dollar Decline: Investors Bet on End of Fed's Rate Hikes

November 2023, - Investors are rapidly selling off the US dollar, betting that the Federal Reserve has ended its aggressive interest rate hikes, with expectations of multiple rate cuts in the next year. The dollar is on track for its worst monthly performance in a year, with the dollar index falling to levels seen at the start of the year. Asset managers are reducing their overweight positions in the dollar, shifting towards currencies like the Japanese yen, Canadian dollar, and Latin American currencies. US inflation fell to 3.2% in October, leading markets to anticipate over 0.5 percentage points of Fed rate cuts by September 2024. The weaker dollar is beneficial for Japan, easing inflationary pressures, and for emerging markets, making dollar-denominated debts more manageable. The trend of dollar weakness is expected to continue into 2024, influenced by reduced US-China tensions and less reliance on the dollar.