Dollar remains near annual lows as markets await possible U.S. interest rate cuts

(MENAFN) The U.S. dollar remained near its lowest level in over a year against a basket of major currencies on Tuesday, as investors closely monitored developments regarding a potential U.S. interest rate cut anticipated next month. Meanwhile, the British pound hovered near a multi-year high as traders remained cautious and sought more clarity on the potential size of the U.S. rate adjustment. The anticipation surrounding this decision has created a tense market atmosphere, with currencies fluctuating amid uncertainty. The Australian dollar, for example, reached an eight-month high, supported by data indicating a slowdown in domestic inflation to a four-month low in July. Despite the positive sentiment from this data, the overall market reaction was somewhat muted, reflecting disappointment over the broader pace of price movements. By the end of the trading session, the Australian dollar steadied, trading flat at USD0.06793.

The dollar index, a measure of the greenback against a basket of major currencies, recorded a modest gain of 0.2 percent, reaching 100.78. This level is slightly above a 13-month low of 100.51, which was hit in the previous session. Despite this slight uptick, the dollar has declined by 3.4 percent over the month, positioning it for the largest monthly drop since November 2022. The downward trend of the dollar underscores the current market sentiment, which is heavily influenced by expectations of an imminent interest rate cut by the Federal Reserve. In contrast, the British pound saw a minor decline of 0.14 percent, settling at USD1.3243 after earlier reaching its highest level since March 2022 at USD1.3269. Similarly, the euro experienced a slight dip of 0.24 percent against the dollar, settling at USD1.1156. However, it remained near a 13-month high, which was recorded earlier in the week.

The Japanese yen experienced a decline as well, moving further away from its three-week high of 143.45 per dollar reached on Monday. It fell by 0.23 percent to settle at 144.33 per dollar. Meanwhile, the New Zealand dollar also experienced a slight dip of 0.1 percent, trading at USD0.6246. These movements across different currencies reflect the broader uncertainty prevailing in the global markets as investors look for signs that could indicate the future direction of U.S. monetary policy. The mixed signals from inflation data, interest rate expectations, and currency movements underscore the volatility that currently defines the global financial landscape, with traders remaining cautious and vigilant for any new economic indicators that could influence central bank decisions worldwide.

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