The dollar slumped on Tuesday, with a key dollar index falling for a fifth-straight session to trade at a more than three-month low as traders pondered what's next for interest rates and the economy.
What are currencies doing?
The ICE U.S. Dollar Index lost 0.3% to 91.833 to trade at its lowest level since September 22, according to FactSet data. The index, which measures the greenback against six rival currencies, lost 9.9% in 2017, suffering its worst year since 2003 (http://www.marketwatch.com/story/dollar-set-to-suffer-worst-year-since-2003-with-10-yearly-loss-2017-12-29).
The euro rose to $1.2065 on Tuesday, up from $1.2006 late Monday in New York.
The pound climbed to $1.3543 from $1.3502 on Monday.
The yen also rose against the dollar, with the buck buying Yen112.20 compared with Yen112.67 on Monday.
What's driving the markets?
Expectations of higher U.S. interest rates later this year and the passage of the Republican tax bill have failed to give the dollar a lift. Analysts say it's partly because of the good news for the buck had already been priced in, and partly because traders wonder how much the tax reforms will actually boost the economy.
Falling U.S. bond yields were cited as one reason for dollar weakness last week, when the yield for the benchmark 10-year Treasury note Wednesday saw its biggest one-day drop in more than three months. Since, yields have crept higher and are now at 2.433%.
What are strategists saying?
"The disparity between the rising U.S. rates and sinking buck must be particularly frustrating to the dollar bulls, but the price action suggests that the market simply does not believe the high growth scenario of the Fed," said Boris Schlossberg, managing director of FX strategy at BK Asset Management, in a note.
"Fed funds futures are still barely pricing in the prospect of only 2 rate hikes this year and until sentiment changes, it's difficult to see how the buck can climb," he added.
(END) Dow Jones Newswires
January 02, 2018 07:03 ET (12:03 GMT)