The dollar index closed the year down 2%, the first yearly decline since 2020 after gaining about 15% over the previous two years as traders piled on bets that the Federal Reserve could start cutting interest rates as soon as March next year. After implementing an aggressive rate-hiking cycle that started in early 2022, the US central bank is now expected to begin easing early next year amid signs that inflation in the US is cooling. On the other hand, the investors are less certain that the European Central Bank and the Bank of England will cut the borrowing costs as quickly. The euro closed the year at $1.1037 notching a 3.1% gain for the year, its first positive one since 2020. Also, the pound stabilized at $1.273, gaining 5.2% in 2023, its best performance since 2017. Still, the dollar was up 7.6% against the yen which was pressured by BoJ ultra-loose monetary policy.
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