The dollar continued its downward trajectory on Thursday, falling back to its lowest levels since July on growing expectations of rate cuts in the US next year.

After erratic performances throughout the year, in line with changing forecasts for the Fed's monetary policy, the US currency has depreciated sharply in recent weeks, with the Federal Reserve clearly hinting that it could start cutting interest rates as early as March 2024.

The dollar index, which compares the greenback against a basket of currencies, fell a further 0.3% today, below 100.7, its lowest mark since July 19.

It is currently trading at 104.7 against the yen, its lowest level since July 31.

Against the single European currency, the dollar is trading at around 1.1125 to the euro, also at a five-month low.

The same is true of sterling, which is back towards its annual highs.

The dollar's bout of weakness is largely fuelled by the fall in US bond yields, which mechanically limits the greenback's return.

However, the dollar's downward cycle could be coming to an end, according to some professionals, for whom the greenback should appreciate against most of the major currencies in 2024, despite the expected rate cuts on the other side of the Atlantic.

'The rapid deterioration of the European economy, with countries such as Germany facing recession risks, could lead the ECB to review its current policy at its next meeting', comments Ralph Ratterman, asset manager at DHF Capital.

Up until now, foreign exchange markets have focused on the scenario of a first rate cut in the USA, before Europe, but investors are increasingly leaning towards a rapid reduction in the cost of money on the Old Continent, where the need for action is pressing.

In the UK, too, recent indicators showing a contraction in economic activity and a slowdown in inflationary pressures could push the Bank of England to opt for rate cuts", adds Ralph Ratterman.

In Japan, the central bank is maintaining its negative interest rate policy, and recently raised the possibility of "additional easing measures".

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