From Quiver Quantitative:



The U.S. dollar is facing challenges in gaining momentum in the global currency markets due to cooling U.S. inflation, which is fueling expectations that the Federal Reserve may ease interest rates in the coming year. This has caused the dollar index, a measure of the U.S. currency’s strength against a basket of major currencies, to hover near a five-month low, reflecting the market’s anticipation of potential rate cuts by the Fed.

The Japanese yen has steadied near its five-month peak, benefiting from the Bank of Japan’s potential shift from its longstanding ultra-easy monetary policy. Comments from BOJ Governor Kazuo Ueda have raised the prospect of a policy change, as he noted an increasing likelihood of achieving the central bank’s 2% inflation target. While Ueda refrained from providing a definitive timeline for policy alterations, his remarks have fueled speculation about Japan’s departure from its low-inflation environment.

The kiwi and Aussie dollars have seen slight gains amidst these developments, and the ongoing adjustments in central bank policies are expected to continue influencing currency movements as the new year approaches. The dollar’s fate hinges on further inflation data and Fed rhetoric in the new year, while the yen’s direction depends on the BOJ’s next move and any concrete hints of policy normalization.



Read more: Dollar Wavers in Holiday Trade as Inflation Eases, Fed Rate Cut Looms