The dollar remained stable at the start of 2024 as traders assessed the potential for interest rate cuts from the Federal Reserve in 2024. Market focus turned towards upcoming economic data releases this week, aiming to glean insights into the central bank's future decisions.

The dollar index, gauging the US currency against six peers, experienced a 2 per cent decline in 2023, ending two years of gains. Currently standing at 101.43, it saw a marginal increase of 0.049 per cent on Tuesday. 

Market expectations now indicate an 86 per cent probability of rate cuts starting in March, with projections of more than 150 basis points of easing throughout the year.

Marc Chandler, Chief Market Strategist at Bannockburn Global Forex, emphasized the uncertainty surrounding the timing and pace of potential rate cuts. Shifting market sentiment, influenced by moderating price pressures and weaker growth signals, has transitioned from the 'higher for longer' stance of the previous year to anticipating aggressive easing measures by central banks.

Investors are eagerly awaiting a barrage of economic data scheduled for release this week, including job openings and nonfarm payrolls. 

Additionally, the minutes from the December Fed meeting, where the central bank adopted a surprisingly dovish tone and projected 75 basis points in rate reductions for 2024, will be closely examined.

While the Fed diverges from its counterparts, such as the European Central Bank (ECB) and Bank of England (BoE), in its dovish approach, traders are factoring in expectations of 158 basis points of cuts by the ECB and 144 basis points by the BoE in 2024.

The euro experienced a slight decline of 0.07 per cent to $1.1036, moving away from the five-month peak reached last week. Sterling, on the other hand, held steady at $1.2726, registering a 5 per cent gain in 2023, its strongest performance since 2017. 

The Japanese yen weakened by 0.24 per cent to 141.20 per dollar at the start of the year, with attention focused on the Bank of Japan's stance on negative interest rates in 2024.

Amid global developments, Tokyo markets were closed due to a holiday, contributing to lighter trading volumes. A powerful earthquake in central Japan on New Year's Day resulted in casualties and added to the day's somber tone.

In other currency movements, the Australian dollar remained largely unchanged at $0.6813, while the New Zealand dollar saw a 0.08 per cent decline to $0.6314, ending 2023 with relatively stable performance.

(With Reuters Inputs)