Us Dollar To Show Weakness In 2024

Us Dollar To Show Weakness In 2024 by Andrew Blumer last updated on February 05, 2024

Us Dollar To Show Weakness In 2024 In Case Of Fed Pivot

Everyone agrees that the December meeting showed the dovish side of the Federal Reserve. This has increased the chances of a weaker US Dollar throughout 2024.

The only thing that could limit the decline of the US Dollar is solid economic results. However, that is still based on a Fed pivot in 2024.

Greenback Touched Record Highs In 2020

The US Dollar managed to reach a 20-year high in 2022 due to the higher interest rates from the Federal Reserve. Since then, the USD has been showing range-bound movements mainly driven by the Fed's commitment to keep rates high.

That's why the US Dollar closed its first-ever year with a 2% loss. If we look back, that's the first instance, which was only last seen in 2020.

The last few years have all been about rate hikes, but that changed with December's meeting minutes. The Fed chair clarified that inflation is cooling down & and the effects of interest rates have yet to materialize.

For 2024, economists are not hinting at a minimum of 75 bps rate cuts, which will be spread out. Although it is only about 0.75%, that's still progress & and it will likely uplift the stock markets.

Another signal which points to a weaker US dollar is the falling bond yields. This makes the greenback less attractive for investors who seek high-yielding assets. And once the rate cuts kick in, the yields will only turn lower & and also drag the greenback with it.

Although everything hints at a weaker greenback, investors are still cautious about going all in. This is because taking such a position in the past has proven to be a big mistake.

The bottom line is that policy pivot from the Fed will invite weakness in the USD and could send it to the same levels as a few years ago.