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Dollar Climbs Against Major Peers Amid Speculation on Global Rate Cuts

4 weeks ago

The dollar exhibited strength against nearly all of its Group-of-10 counterparts and saw significant gains against select emerging-Asian currencies following an unexpected rate cut by the Swiss National Bank on Thursday. This move sparked speculation that other major central banks might accelerate their pace of policy rate reductions, surpassing the trajectory set by the Federal Reserve. Among G-10 currencies, the Australian dollar experienced the most pronounced weakening.

Market sentiment regarding the dollar is undergoing reassessment post the Federal Open Market Committee (FOMC) meeting. The depreciation of the onshore yuan is sending ripples through the broader dollar-Asia region, as well as affecting G-10 currencies, particularly the Australian dollar, which frequently mirrors movements in the yuan within the G-10 sphere.

The latest US economic data provided support for arguments suggesting that the Fed might need to reconsider its projections for rate reductions. Just a day after the central bank hinted at three 25-basis-point cuts in 2024, housing, manufacturing, and labor market indicators released on Thursday in the US portrayed a resilient economy. This resilience could prompt the Fed to implement interest rate cuts at a slower pace than anticipated by the market.

In the commodities market, oil prices sustained a two-day decline, with traders evaluating the global interest rate landscape and geopolitical tensions in the Middle East. Conversely, gold experienced a retreat after reaching a milestone by surpassing the $2,200 per ounce mark for the first time.

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