The United States of America dollar dropped to a four-week low against a basket of currencies on Thursday, December 28, pressured by a recent dip in U.S. 10-year bond yields, while volatile bitcoin came under renewed pressure after a 30 percent fall in less than two weeks.
The dollar index, which measures the greenback against a basket of six major currencies, slipped as much as half a percent on Thursday to its weakest since Dec. 1 .DXY.
The U.S. currency has dropped more than 9 percent this year, putting it on track for its biggest annual slide since 2003 .DXY. The dollar had started the year on a high, hitting its strongest in 14 years on hopes that new U.S. president Donald Trump would implement pro-growth, pro-inflation measures.
But it has fallen on worries that Trump would not succeed in pushing through those policies, and as other countries’ central banks have moved towards tightening monetary conditions, lessening the divergence between the U.S. Federal Reserve’s policy and the rest of the world.
The Republican-controlled U.S. House of Representatives gave final approval this month to the biggest overhaul of the U.S. tax code in 30 years, which gave the dollar some support, but markets are not confident that the tax reform will feed through quickly into increased consumer confidence.
“The partisan way in which the (tax) legislation was pushed through Congress is likely to make consumers a bit sceptical about the impact on the economy,” said MUFG macro strategist Derek Halpenny, in London. “It’s going to be a while before consumers become convinced there is something beneficial in it.”
The U.S. 10-year Treasury yield stood at 2.437 percent after its biggest one-day fall in almost four months on Wednesday. US10YT=RR
“The flattening of the U.S. yield curve is highlighting the fact that the market is not getting too enthusiastic about growth prospects for 2018, despite the tax reform legislation being signed,” added Halpenny.
The euro rose almost half a percent to $1.1946 EUR=, its highest in a month. The single currency has gained more than 13 percent so far this year, well on the way to its best annual performance since 2003.
Sterling also benefited from the dollar’s weakness on Thursday, gaining as much as half a percent to hit a two-week high of $1.3456 GBP=D3.
The pound is on track for its best year against the dollar since 2009, with a more than 9 percent climb, though it is still down more than 10 percent since last year’s vote in Britain to leave the European Union.
Bitcoin, the biggest and best-known cryptocurrency, has dwarfed any gains in traditional financial markets this year, with a more than 1,400 percent rise.
But since hitting record highs around $20,000 11 days ago, it has been falling sharply.It fell around 7 percent on the day on Thursday to trade just above $14,000 BTC=BTSP on the Luxembourg-based Bitstamp exchange.
Earlier on Thursday, South Korea’s government said it would impose additional measures to regulate speculation in cryptocurrency trading.
