One euro worth 1.10 dollars

(Patria) - In currency markets, the dollar's value against a basket of currencies fell last week, for the second week in a row, and plunged to a five-month low as interest rate cuts by the US central bank are expected next year.

The dollar index, which tracks the value of the US dollar against six major world currencies, slipped 0.9 percent last week to 101.70 points, and at one point plunged to 101.42 points, its lowest level since July.

The dollar weakened by 1 percent against the European currency, bringing the euro's price to $1.1010. However, the dollar's exchange rate rose against the Japanese currency by 0.2 percent to 142.40 yen.

The dollar index's fall to a five-month low is a consequence of investors' belief that the US central bank has completed its interest rate hike cycle, given the gradual easing of inflation, and that rate cuts will follow next year.

A series of recent macroeconomic indicators support this thesis. Last week, among other things, the third estimate of gross domestic product (GDP) was released, showing that the US economy grew slightly slower in the third quarter than expected.

Slowing growth could also weaken inflation, leading to increased speculation that the Fed could start cutting rates as early as March, Hina reports.

While Fed officials estimate that they will cut rates three times next year, most likely by 0.25 percentage points each time, the market speculates that as many as six rate cuts are possible next year, starting in March.

Although European Central Bank officials say they are not yet considering rate cuts, analysts estimate that the ECB, like the Fed, has completed its interest rate hike cycle and that a reduction in the cost of money will follow next year in the eurozone.