2023.12.2805:09:00UTC+00U.S. Dollar Extends Fall Amid Rising Bets On Fed Rate Cut

The U.S. dollar extended its early weakness against other major currencies in the Asian session on Thursday, amid rising bets that the Federal Reserve will start cutting interest rates soon.

Traders speculate the U.S. Fed will cut interest rates in March 2024. Several other central banks are also widely expected to ease their policy tightening to spur growth.

Investors are currently pricing in the first 25 bps rate cut in March, followed by two more 25 bps cuts in May and June due to slowing inflation.

Overall, markets eye 5 cuts in 2024 and 3 more cuts in 2025 so that rates reach 3.00-3.25 percent in 2025Q3.

The safe-haven dollar started falling against its major counterparts from 25th December 2023.

In the Asian trading now, the U.S. dollar fell to an 8-year low of 0.8396 against the Swiss franc and a 2-week low of 141.18 against the yen, from yesterday's closing quotes of 0.8425 and 141.45, respectively. If the greenback extends its downtrend, it is likely to find support around 0.82 against the franc and 140.00 against the yen.

The greenback slid to a 5-month low of 1.1123 against the euro and nearly a 5-month low of 1.2815 against the pound, from Wednesday's closing quotes of 1.1108 and 1.2800, respectively. On the downside, 1.13 against the euro and 1.29 against the pound are seen as the next support levels for the greenback.

Against the Australia and the New Zealand dollars, the greenback dropped to 5-1/2-month lows of 0.6872 and 0.6370 from yesterday's closing quotes of 0.6853 and 0.6348, respectively. The greenback is likely to find support around 0.69 against the aussie and 0.65 against the kiwi.

The greenback edged down to 1.3193 against the Canadian dollar, from yesterday's closing value of 1.3206. The next possible downside target for the greenback is seen around the 1.30 region.

Looking ahead, U.S. weekly jobless claims, U.S. goods trade balance for November, U.S. retail and wholesale inventories for November, pending home sales data for November and U.S. EIA crude oil data are slated for release in the New York session.