Wednesday, February 28, 2024

Dollar Expectations in 2024… There is a safe fall in interest rates and pressures

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Dollar Expectations in 2024… A safe fall in interest rates and investors’ alternatives are difficult

Analysts expect the dollar to continue to depreciate during the New Year 2024, but at a smaller rate compared to its levels this year, due to stronger growth in the US economy compared to other economies in Europe and Japan.

The strength of U.S. economic growth typically leads to an influx of foreign investment into Wall Street financial markets in search of dollar returns.
The Federal Reserve Board, the US central bank, left interest rates unchanged for the third consecutive meeting and the fourth time since the start of the current tightening cycle in March 2022. The decision was made by the Federal Open Market Committee in its meeting. On Wednesday, members voted unanimously to set the interest rate ceiling at the highest level, its 22-year level, at 5.25% to 5.50%.
Committee members proposed cutting rates at least three times by 2024, a quarter of a percentage point at a time, lower than market expectations indicating four cuts but larger than policymakers had previously indicated.
Fixing the interest rate to the dollar and threatening to cut it in 2024 led to a rise in US stock indices and a decline in 10-year US bond yields. All of these indicators support the dollar’s performance in the year ahead, especially as the Chinese real estate market is hit by a group of financial crises led by debt.
After fixing interest rates on the greenback, the dollar fell to a four-month low on global exchange markets as traders absorbed a signal from the U.S. Federal Reserve that the high-interest rate cycle for the greenback had reached its end. Next year, 2024, interest rates are set to be cut.
Federal Reserve Chairman Jerome Powell told the Federal Open Market Committee meeting that the historic tightening of monetary policy is over. According to Reuters, policymakers were almost unanimous in their expectation that borrowing costs would fall in 2024.

Analysts believe the dollar is currently experiencing its worst day of the year. On Thursday, the Bloomberg Dollar Spot Index fell about 0.5% in morning trading, the index’s lowest level since August, according to Bloomberg. The index was down 0.8% in Wednesday’s trading session after the US interest rate cut. All G10 exchange rates rose against the dollar, with the Norwegian krone, Japanese yen, Swedish krona, as well as the Australian and New Zealand dollars up more than 1%. US Treasury yields also fell.
Traders stepped up their bets on further easing of monetary policy next year after policymakers at the U.S. Federal Reserve expected to cut interest rates next year.
Factors affecting the course of the dollar’s exchange rate include variation in bank interest rates and inflation rates, which determine the net return to investors, in addition to variation in economic growth with competing economies in capitalist countries. It is noteworthy that the American economy is currently in a better position in terms of inflation rate and economic growth rate compared to Europe and Britain.
But despite the characteristics of the US economy, Bank of America appears more pessimistic in its expectations for the dollar, as the bank’s expectations for 2024 indicate that the dollar will continue to weaken over the next year. In their forecast published by the London-based Pound Sterling website on December 5, the bank’s analysts said interest rate cuts in the dollar were “more important for the exchange rate market than cuts at other central banks”.
Bank of America (BofA) expects the euro-dollar exchange rate to exceed 1.10 in the coming months. However, its analysts warn that the current crisis in Europe does not mean “the euro will continue to rise”. By.
In this regard, Bank of America’s head of G10 foreign exchange strategy, Thanos Vampakidis, said the future of the US currency depends on expectations of US economic growth relative to other economies in industrialized countries. Economists at Bank of America expect the Federal Reserve to make three interest rate cuts over the next year, starting in June.
But Isabella Rosenberg, a monetarist at Goldman Sachs, believes the dollar has weathered global growth and stabilized its value in 2023, and the following year, 2024, it will remain at the current year’s level. .

In an analysis of the future path of the currencies late last month, the economist expected the dollar to underperform the currencies of countries competing with the US. He believes that the superiority of the dollar exchange rate this year was due to the superiority of the US economy over other economies, as the US economy grew at a rate of 2.4%, well above the agreed growth estimate of 0.4%. At the beginning of the year.
Given this background and the economic challenges in Europe and China, he says, “it’s not surprising that the majority of cross-border flows are directed toward the United States.” Goldman Sachs Research expects growth of 2.1% in the US next year, 2024. Rosenberg believes growth at this rate will be enough to attract foreign assets to invest in the US market, which will strengthen the dollar exchange rate.
The euro rose more than 0.8% to trade at 1.088 against the dollar on Wednesday afternoon in New York, according to Bloomberg data on Wednesday.
Analysts at ING Bank expect the dollar to weaken over the next year, with commodity currencies such as the Norwegian krone benefiting from the dollar’s decline and the Japanese yen becoming a currency due to the weakness of the Chinese economy. Trading in exchange markets in the next year. It is worth noting that Yen is one of the currencies that has fallen sharply in the current year.

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Nadia Barnett
Nadia Barnett
"Award-winning beer geek. Extreme coffeeaholic. Introvert. Avid travel specialist. Hipster-friendly communicator."

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