The dollar is at its weakest levels with the increasing possibility of a US interest rate cut

The dollar fell today, after data on manufacturing activity in the world’s largest economy showed a weaker than expected performance, which led to increased pressure on the Federal Reserve (the US central bank) to cut interest rates at its monetary policy meeting later this month.

The dollar index, which measures the performance of the US currency against 6 major currencies, fell to 99.408 at the beginning of the Asian trading session after declining yesterday, Monday, for the seventh session in a row, reaching its lowest level in two weeks during American trading hours, with stocks and bonds declining.

Data released yesterday, Monday, showed that the manufacturing sector in the United States contracted for the ninth consecutive month in November, with the Institute for Supply Management’s purchasing managers’ index for the manufacturing sector falling to 48.2 in November from 48.7 in the previous month.

“For me, it all suggests that demand in the economy has slowed,” said Brian Martin, head of economics at ANZ Bank in London.

He added, “I really believe that the Federal Reserve needs to cut interest rates not only in December, but to continue the cuts next year,” noting that he expects additional cuts of 50 basis points in 2026.

The CME Group’s FedWatch tool shows that markets expect 88 percent that the Federal Reserve will cut interest rates by 25 basis points at its next meeting on December 10, compared to 63 percent a month ago.

The dollar was trading against the yen at 155.51 yen, with little change from its levels at the end of the US trading session, after Bank of Japan Governor Kazuo Ueda said yesterday, Monday, that the bank would study the pros and cons of raising interest rates at its next monetary policy meeting, which led to a rise in two-year Japanese bond yields above one percent for the first time since 2008.

The euro stabilized at $1.1610 as talks continued to end the war in Ukraine.

The British pound was trading at $1.3216, near its highest level in a month, but was little changed so far during the day.