Dollar hits 5-month low as US inflation cools in November

The US Dollar dipped against a basket of currencies, reaching a nearly five-month low, following data revealing that annual US inflation eased further below 3 per cent in November. The figures solidify market expectations for a US interest rate cut in March.

According to the personal consumption expenditures (PCE) price index, inflation for the 12 months through November stood at 2.6 per cent, down from 2.9 per cent in October. Excluding volatile food and energy components, the core PCE price index rose 3.2 per cent year-on-year in November, marking the smallest increase since April 2021. The Federal Reserve utilizes the PCE price measures to target its 2 per cent inflation goal.

Stuart Cole, Chief Macro Economist at Equiti Capital, commented on the data, stating, "The market will view the data as very much adding weight to the Fed's recent tilt towards an easier monetary stance."

The Dollar, down 0.13 per cent at 101.65, is currently at its lowest point since late July. Over the last two weeks, the index has slipped more than 2 per cent and is set to end the year down just under 2 per cent.

Following the Federal Reserve's dovish pivot in December, which prompted expectations of rate cuts in 2024, the Dollar has faced selling pressure. Although Federal Reserve officials have since pushed back on the idea of rapid rate cuts in 2024, the Dollar remains on a downward trajectory.

Against the Swiss franc, the Dollar weakened to a near nine-year low, last down 0.15 per cent, reminiscent of January 2015 levels when the Swiss National Bank discontinued its policy of having a minimum exchange rate for the franc against the euro.

The euro rose 0.05 per cent, and sterling gained 0.28 per cent to $1.2728. The Dollar edged higher against the Yen, up 0.18 per cent at 142.37 Yen. The Australian and New Zealand Dollars, considered risk-sensitive, traded higher on the day, with the Aussie up 0.12 per cent at $0.6811 and the kiwi up 0.24 per cent at $0.6309, reaching a five-month high.

In cryptocurrencies, bitcoin slipped 0.47 per cent to $43,666, just below the eight-month high of $44,729 earlier this month. Revival in the crypto market has been supported by filings for spot bitcoin and ether ETFs, including those from traditional finance heavyweights, following a series of meltdowns in 2022.

(With Reuters inputs.)