Dollar Dominance: Stirring Global Currency Markets

The dollar experienced its best weekly performance in a month due to the anticipation of slower Federal Reserve rate cuts next year. Meanwhile, the yen and sterling weakened amid differing central bank policies in Japan and economic contractions in the UK.

The dollar soared to its strongest weekly position in a month on Friday as investors recalibrated their expectations for Federal Reserve policy, anticipating a more cautious pace of rate cuts next year. Concurrently, the pound took a hit following an unexpected economic contraction in the UK.

The currency index, gauging the dollar against six peers, rose modestly, promising a nearly 1% weekly lift, its most substantial in four weeks. As the job market cooled alongside anticipations and producer price inflation set the scene, the market aligned with a Fed move in December.

In Japan, the yen dropped while the dollar surged, amid signals that the Bank of Japan might not proceed with a rate hike. Across the Atlantic, the pound dipped further on grim UK growth figures. Elsewhere, rate cuts subdued the Swiss franc, and trade tensions pressured the Canadian dollar.

(With inputs from agencies.)