The Japanese yen, Norwegian krone and South African rand have turned from the worst-performing major currencies this year to become the best in recent days, along with Sweden’s krona. The sharp turn of fortunes has come on the back of softer US inflation that is weakening the dollar.
According to bnnbloomberg.ca, as traders are now confident that the Federal Reserve is close to the end of its interest-rate hiking cycle, a spike in risk appetite saw some of the biggest currency moves of recent times. The krona rallied the most in a week since 2009 to turn positive for the year, while the krone and rand gained the most since 2020. The yen posted its best performance since the beginning of 2023.
As cooling US inflation is accelerating a decline in the dollar, risk assets around the world stand to benefit. The dollar is down nearly 13% against a basket of currencies from last year’s two-decade high and stands at its lowest level in 15 months. Its decline quickened after the US reported softer-than-expected inflation data last week, supporting views that the Federal Reserve is nearing the end of its interest rate-hiking cycle.
Because the dollar is a linchpin of the global financial system, a wide range of assets stand to benefit if it continues falling.
Source: reuters.com