Dollar falls to end worst year since 2003

World
Europe

The dollar fell to its lowest in over three months against a basket of major currencies on Friday, marking its steepest annual drop since 2003, on doubts over the durability of a pickup in US economic growth in the wake of last week’s tax overhaul.

One of the most dramatic market developments in 2017 was the breathtaking rise of bitcoin and other cryptocurrencies. While they have pulled back at year-end, many of these digital currencies have surged in value this year.

The greenback may lag further against its peers in 2018 as investors expected other major central banks to reduce their stimulus while the Federal Reserve has signaled it would raise interest rates further, analysts said.

“The dollar will face more headwinds in 2018,” said Chris Gaffney, president of World Markets at EverBank in St. Louis, Missouri. “The Fed won’t be going at it alone in terms of taking off more gas from the stimulus pedal.”

A money changer holds US dollar bills at a street in downtown Lima, Peru, December 15, 2017. /Reuters‍ Photo

Bets the European Central Bank might consider raising interest rates by the end of 2018 due to evidence of higher inflation and business activity in the euro have lifted the euro, which was poised for its best yearly performance versus the greenback in 14 years.

The euro hit a three-month peak at 1.2028 US dollars EUR=, bringing its annual gain to 14.2 percent. It was last up 0.56 percent at 1.2008 US dollars.

The euro’s rally was a drag on the greenback in 2017. The index that tracks the dollar versus the euro and five other major currencies fell as low as 92.080, which the lowest since Sept. 22. It recorded a 9.8-percent annual decline, the biggest yearly loss since 2003.

The dollar also weakened against the yen, Canadian dollar, Swedish crown and Swiss franc, which are the other index components this year.

The dollar index was at a 14-year peak at the start of 2017 on hopes for US President Donald Trump’s pro-growth economic agenda. Barring the most dramatic rewrite of the US tax code in 30 years enacted last week, Trump and Republican lawmakers have struggled to pass legislation.

A Bitcoin (virtual currency) coin is seen in an illustration picture taken at La Maison du Bitcoin in Paris, France, June 23, 2017. /Reuters Photo

Furthermore, many institutional investors close their books at the year-end, a deadline for taxation and performance reporting, a time seen leading to dollar selling pressure, analysts said.

Outside of traditional currencies, bitcoin and other cryptocurrencies rebounded after two days of losses tied partly to more regulators toughening rules on digital currencies in a bid to curb excessive speculation.

Bitcoin was last up 1.18 percent at 14,564.76 US dollars on the Bitstamp exchange. It was off the record highs near 20,000 US dollars touched 12 days ago but still headed for a gain of roughly 1,400 percent in 2017.

Financial markets around the world will be closed on Monday on New Year’s Day.

Source(s): Reuters