Khaberni - The dollar is heading towards recording its worst annual performance in more than 20 years, on Wednesday, at a time when investors are betting that the Federal Reserve (the American central bank) will have room to continue cutting interest rates next year, even as some other central banks are raising rates.
The dollar continued to decline in Asian transactions as the strong reading of the US GDP failed to change interest rate expectations, prompting investors to expect two more rate cuts next year.
David Merrill, an economist at Goldman Sachs said, "We expect the Federal Open Market Committee to make two more cuts of 25 basis points bringing the interest rate to between three and3.25%. However, we see the risks leaning towards the downside," attributing this to slowing inflation.
The dollar fell to its lowest level in two and a half months against a basket of currencies at 97.767 and is on track for a yearly loss of 9.9%, which represents its largest annual decline since 2003.
The dollar has had a turbulent year as it fluctuated sharply due to the tariffs imposed by President Donald Trump, which ignited a confidence crisis in American assets earlier in the year, while the growing influence of Trump on the Federal Reserve also raised concerns about the independence of the central bank.
In contrast, the euro rose to its highest level in three months at 1.1806 dollars achieving annual gains of more than 14% since the beginning of this year, putting it on track for its best performance since 2003.
The Australian dollar increased 8.4% since the start of this year reaching its highest level in three months at 0.6710 dollars on Wednesday.
The New Zealand dollar touched its highest level in two and a half months at 0.58475 dollars, after increasing 4.5% over the year, while the British pound reached its highest level in three months at 1.3531 dollars and achieved annual gains of more than 8% this year.
The yen rose 0.4% in recent trading at 155.60 to the dollar on Wednesday, after increasing by more than 0.5% in the previous session.
