USD News Today - The Dollar approached a two-week high against several currencies on Wednesday, fueled by investors' evaluation of US economic data indicating a weakening labor market. They also anticipate that the Federal Reserve will lower interest rates next year.

The Dollar Index rose 0.019% to 103.99, following a 0.3% increase the previous day. This rise marks a 0.5% growth for the month, following a 3% decline in November, which was the largest monthly drop in a year.

Data released on Tuesday showed that job openings in the US fell to the lowest level in 2.5 years in October, indicating that higher interest rates are reducing labor demand. The job openings-to-unemployment ratio reached 1.34 in October, the lowest since August 2021.

Attention is now shifting to the November jobs report, set to be released next Friday, which will provide insights into economic strength ahead of the Federal Reserve's policy meeting next week.

"This week, the primary focus is on the payroll report," said Christopher Wong, a currency strategist at OCBC, adding that an unexpected drop could halt the Dollar's strengthening.

Fed officials are currently preparing for the upcoming US central bank meeting on December 12-13, with attention on the update of interest rate projections for 2024.

Traders estimate a 99.7% certainty that the Fed will maintain its current policy next week, but there is a 56% chance that interest rates will be cut by the central bank in March, according to the CME FedWatch tool.

According to ANZ analysts, the possibility of the Fed starting to cut interest rates may arise around mid-2024, with a warning that Chairman Jerome Powell needs to maintain a hawkish stance during the transition to lower growth and inflation.

If interest rate cuts occur in 2024, the Dollar is expected to loosen its grip on other G10 currencies next year, reducing the prospects for the greenback, according to a Reuters survey of foreign exchange strategists.


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