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Dollar slumps as interest rate hike bets fade as the dollar loses value

Dollar slumps as interest rate hike bets fade as the dollar loses value

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  • <a href="http://tmsnrt.rs/2RBWI5E">:Graphic: World FX rates&a&rc;

Investors continued to unload long positions that profited from an increase in bets that the Federal Reserve will raise rates sooner than previously anticipated, as the dollar lost against a basket of currencies on Friday.

The greenback also experienced a seasonal decline, which is typical in October.

Investors have taken profits since the dollar index hit a one-year high last week, when fears that inflation will remain stubbornly high for longer prompted investors to push forward expectations on when the Fed will first raise rates until mid-2022.

That remarking momentum has now faded as investors take profits and also anticipate faster interest increases in other currencies.

Mazen Issa, a senior fx strategist at TD Securities in New York, stated, Theres skepticism surrounding positioning, weve clearly seen softer dollars since the September Fed. The change coincides with the dollars tendency to soften toward the end of the month, according to the report.

The Fed said at its September meeting that it expects to reduce its monthly bond purchases as soon as November and that interest rate increases may follow sooner than expected. read more

The dollar index fell 0.17 percent to 93.57, compared to its one-year high of 94.56 last week. The dollar jumped 0.18 percent to $1.1646.

Issa believes the dollar will regain traction as global central banks push back against the aggressive repricing of rate hikes, while the Fed is expected to remain hawkish and move forward with a reduction in its bond purchase program.

Once we have the support from other central banks and the Feds commitment to taper, we should see dollar dips really being shallow, Issa said.

The Aussie dollar performed well on Friday, rising 0.43% to $0.7498.

The yen gained against the greenback, though it remains the weakest performer, having fallen by more than 10% this year. The dollar was at 113.77 yen, a 0.29% decrease from the previous high.

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At 9:52AM (1352 GMT), currency bid prices are set at 9PM (1452 AM).

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