2023 will be the worst year for the dollar since the coronavirus pandemic – Kommersant
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2023 will be the worst year for the dollar since the start of the coronavirus pandemic in 2020, reports Bloomberg. In the past year, the American currency index, calculated by the agency, fell by almost 3%, which was the sharpest drop in the last three years.
The rate of decline in the dollar index accelerated most significantly in the fourth quarter of 2023 amid forecasts that the US Federal Reserve System (FRS) will ease policy in 2024 due to a slowdown in the growth rate of the American economy. Bloomberg explains that the Fed’s dovish policy is reducing the dollar’s attractiveness, as central banks around the world can keep their rates high for longer.
“Markets are primed for a Goldilocks scenario where the Fed cuts rates just enough to stimulate the economy without adding to inflation pressures. This determines the dynamics of the dollar,” says SEB AB fixed income and foreign exchange expert Amanda Sundström.
The Goldilocks period is when economic growth neither accelerates nor slows down too much, and that inflation and interest rates and unemployment rates are low. At the same time, the country’s GDP and asset values are growing steadily.
On December 13, the US Federal Reserve for the third time in a row abstained from raising the rate and kept it at 5.25–5.5%. Against this background, the Dow Jones index increased by 1.4%, reaching a record value of 37,090 points. Market participants believe that the Fed will not raise rates at subsequent meetings. In their opinion, the rate reduction will begin no earlier than the spring-summer of 2024.
About the results of the December meeting of the US Federal Reserve – in the publication “Kommersant” “Prepare your sleigh for summer”.
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