Major global currencies, including the U.S. dollar, remained stable as investors anticipated further declines in the dollar following the Federal Reserve’s decision to adopt a less hawkish stance. The dollar index experienced its largest drop since mid-July, declining over 1% last week and hitting a six-week low. Weakening U.S. jobs data, softer manufacturing numbers globally, and declining Treasury yields also contributed to the dollar’s decline. This prompted rallies in other currencies such as the euro, sterling, and the Australian dollar. However, analysts express caution, stating that the factors supporting the strength of the dollar could eventually re-emerge in the medium-term.

Treasury yields also slumped last week due to weak U.S. jobs and manufacturing data. Fed Chair Jerome Powell spoke of ‘balanced’ risks, further contributing to the drop. The U.S. government’s lower refinancing estimate for this quarter and lower-than-expected increases in long-dated debt auctions also led to the decline. Consequently, 2-year note yields dropped by 25 basis points in two weeks, while 10-year yields reached five-week lows. The futures market now implies a 90% chance that the Fed has completed its hiking cycle and an 86% chance of an easing policy by June. Market expectations also suggest possible rate cuts by the European Central Bank and the Bank of England.

The Japanese yen weakened slightly against the dollar, but recent fluctuations suggest that Japanese authorities may not need to intervene in the currency. Meanwhile, sterling remained steady, despite facing a market that has heavily shorted the currency. The drop in the dollar and yields supported gold prices, which were within range of a five-month high. In the cryptocurrency market, bitcoin remained stable as it benefited from the expected end of central bank tightening cycles. Additionally, the focus in the crypto industry has shifted to the potential approval of new spot bitcoin exchange-traded funds (ETFs), which could increase market accessibility.

In summary, major global currencies, such as the U.S. dollar, remained stable as investors anticipated further declines in the dollar following the Federal Reserve’s decision to adopt a less hawkish stance. Weakness in U.S. jobs data, softer manufacturing numbers globally, declining Treasury yields, and changes in government estimates all contributed to the dollar’s decline. However, analysts expressed caution, stating that factors supporting the strength of the dollar could eventually re-emerge. Other currencies such as the euro, sterling, and the Australian dollar rallied as a result. The drop in Treasury yields also supported gold prices, and bitcoin remained stable amidst expectations of an end to central bank tightening cycles.

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