Dollar Index Set for Worst Monthly Loss Since April on Rate Bets
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(Bloomberg) — A gauge of the dollar was set to drop in December by the most in eight months as investors bet the Federal Reserve will wait until at least April to raise interest rates again after last week’s first increase in almost a decade.
The greenback weakened against the euro Monday even after Fed Bank of Atlanta President Dennis Lockhart said the central bank’s commitment to “gradual” tightening suggests interest rates could be raised at every other meeting. Traders are pricing in a slower pace, with the probability that the Fed raises its benchmark rate in April just over 50 percent, according to data compiled by Bloomberg based on futures.
“If you’re looking at an environment where the Fed is going to be gradual in raising interest rates, maybe the 20-25 percent gain in the U.S. dollar we’ve seen over the last couple of years is it,” Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors Ltd., said in a Bloomberg Television interview. “The best is over for the U.S. dollar for the time being.”
The U.S. Dollar Index, which tracks the currency against major peers, has dropped 1.7 percent this month to 98.441 as of 11:54 a.m. in Tokyo, set for the first slide since August. That shaves its 2015 gain to around 9 percent. The gauge closed at its highest on Nov. 30 since the 12-year high of 100.330 marked in March.
The dollar was unchanged at $1.0915 per euro, after falling 0.4 percent in New York. It traded at 121.25 yen from 121.19. It has lost 3.2 percent against the shared currency in December, the most since April, and 1.5 percent versus the yen, the most since August.
The Fed raised its target for the first time in almost a decade on Dec. 16, with Chair Janet Yellen emphasizing the gradual pace of further increases at a news conference following the decision.
The greenback weakened against the euro Monday even after Fed Bank of Atlanta President Dennis Lockhart said the central bank’s commitment to “gradual” tightening suggests interest rates could be raised at every other meeting. Traders are pricing in a slower pace, with the probability that the Fed raises its benchmark rate in April just over 50 percent, according to data compiled by Bloomberg based on futures.
“If you’re looking at an environment where the Fed is going to be gradual in raising interest rates, maybe the 20-25 percent gain in the U.S. dollar we’ve seen over the last couple of years is it,” Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors Ltd., said in a Bloomberg Television interview. “The best is over for the U.S. dollar for the time being.”
The U.S. Dollar Index, which tracks the currency against major peers, has dropped 1.7 percent this month to 98.441 as of 11:54 a.m. in Tokyo, set for the first slide since August. That shaves its 2015 gain to around 9 percent. The gauge closed at its highest on Nov. 30 since the 12-year high of 100.330 marked in March.
The dollar was unchanged at $1.0915 per euro, after falling 0.4 percent in New York. It traded at 121.25 yen from 121.19. It has lost 3.2 percent against the shared currency in December, the most since April, and 1.5 percent versus the yen, the most since August.
The Fed raised its target for the first time in almost a decade on Dec. 16, with Chair Janet Yellen emphasizing the gradual pace of further increases at a news conference following the decision.
–With assistance from Ron Harui and Yvonne Man.
To contact the reporters on this story: Chikako Mogi in Tokyo at cmogi@bloomberg.net; Kevin Buckland in Tokyo at kbuckland1@bloomberg.net To contact the editors responsible for this story: Tomoko Yamazaki at tyamazaki@bloomberg.net Candice Zachariahs
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