(Bloomberg) -- The dollar extended its drop after the Federal Reserve's preferred gauge of underlying inflation showed muted price gains, affirming the central bank's pivot toward interest-rate cuts next year.
The so-called core personal consumption expenditures price index, which strips out the volatile food and energy components, increased 0.1% in November from a month earlier, after a downwardly revised 0.1% gain in October, according to a report from the Bureau of Economic Analysis.
“Unless we see a re-emergence of inflation, the USD bear market has commenced,” said Paresh Upadhyaya, director of fixed income and currency strategy at Amundi Asset Management. “Today's numbers continue to support the market narrative of more Fed cuts.”
The Bloomberg Dollar Spot Index fell to lowest since July on Friday, weakening against all of its major peers in the developed world. The Swiss franc rose to the strongest level against the US currency since 2015, while the euro and Norwegian krone rose to their highest levels since August.
It's been a rocky few months for the dollar, which began a rapid ascent in July only to reverse course in recent weeks as economic reports showed US inflation easing and labor markets cooling. The latest data has reinforced the narrative of a soft landing in the world's largest economy. The greenback extended losses in December after the Fed gave its clearest signal yet that its aggressive hiking campaign is finished, forecasting a series of rate cuts in 2024.
Read more: Fed's Preferred Inflation Gauges Cool, Reinforcing Rate-Cut Tilt
The Fed's dovish tilt contrasts with European Central Bank policymakers cautioning investors against betting on imminent reductions. The euro has gained about 3% against the greenback this year, with the dollar poised for its first annual decline in three years.
Meanwhile, the Swiss franc has jumped to its highest level against the dollar since 2015, when Switzerland's central bank abandoned its policy to contain currency strength. It also touched an almost nine-year high versus the euro, a level that was reached earlier this month.
The franc is outperforming all its Group-of-10 currency peers this year, bolstered by the view that the Swiss National Bank's preference for a stronger domestic currency will keep it afloat.
--With assistance from Vassilis Karamanis and George Lei.
(Updates with dollar moves throughout, adds PCE data and comment)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
