A bank employee counts U.S. dollar banknotes at a Kasikorn bank in Bangkok, Thailand, January 26, 2023. REUTERS/Athit Perawongmetha ACQUIRES LICENSE RIGHTS
LONDON/TOKYO, Dec 4 (Reuters) – The dollar rose on Monday, regaining some ground after falling for three straight weeks on bets the Federal Reserve will soon cut interest rates, while Bitcoin broke the $41,000 mark for the first time since the beginning of 2022.
The euro was last down 0.1% at $1.0876, while the dollar index, which tracks the currency against six major currencies, rose 0.19% to 103.33.
“I think it's due to the fact that U.S. interest rate expectations have gone too far and will fall more sharply in December than interest rate expectations elsewhere,” said Colin Asher, senior economist at lender Mizuho in London.
Last month, the euro gained 3% against the dollar, reaching over $1.10, its highest level since August, as data showed U.S. inflation cooling rapidly. The dollar index fell 3.1% in November, its biggest monthly decline in a year.
“November was… a very bad month for the U.S. dollar, partly due to expectations of looser Fed policy,” Asher said. “We see scope for a turnaround at the end of the year.”
Sterling fell 0.27% to $1.2675 on Monday, while the Australian dollar fell 0.44% to $0.6646. The US dollar also gained against the Swiss franc, most recently by 0.31% to 0.8723 francs.
Bitcoin has surged above $41,700 to its highest level since April 2022, buoyed by expectations that U.S. regulators will soon approve a Bitcoin exchange-traded fund. Investors' bets that the Fed's rate-hiking cycle is over have also boosted riskier assets in financial markets.
Chairman Jerome Powell said Friday that the Fed was prepared to tighten policy further if necessary, but also said interest rates were “well in restrictive territory” and slowing inflation.
The dollar was little changed against the yen at 146.69, after falling to 146.24 in the Asian session, its lowest level since mid-September.
“A steady USD decline requires more than just expectations of interest rate cuts from the Fed, it also requires strong growth outside the US, which does not appear to be the case at the moment,” said Charu Chanana, market strategist at Saxo Markets.
She said the U.S. dollar would likely experience periods of strength during a broad downtrend.
Data on Monday showed that exports from Germany fell unexpectedly in October, dashing hopes of stabilization in Europe's largest economy.
The most important data point for investors this week is November's U.S. jobs report, which is expected to show that the American economy added 180,000 jobs last month, up from 150,000 in October.
Currency markets could also be influenced this week by speeches from several European Central Bank officials, including a speech by President Christine Lagarde later on Monday.
Eurozone retail sales are expected on Wednesday, ahead of Chinese trade figures on Thursday.
Reporting by Harry Robertson in London and Brigid Riley in Tokyo; Edited by Bernadette Baum
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