The dollar is heading towards its worst annual performance since 2003

The dollar is heading towards recording its worst annual performance in more than 20 years today, at a time when investors are betting that the Federal Reserve (the US central bank) will have room to continue lowering interest rates next year, even as some other central banks tend to raise interest rates.

The dollar continued to decline in Asian trading, as the strong reading of the US gross domestic product did not succeed in changing interest rate expectations, which led investors to expect two more price cuts next year.

David Merkel, an economist at Goldman Sachs, said: “We expect the Federal Open Market Committee to make two more cuts by 25 basis points, bringing the interest rate to between three and 3.25%. But we see that the risks tend to be lower,” attributing this to the slowdown in inflation.

The dollar fell to its lowest level in two and a half months against a basket of currencies at 97.767 and is heading for an annual loss of 9.9 percent, which represents its largest annual decline since 2003.

The dollar went through a turbulent year, as it fluctuated strongly due to the tariffs imposed by President Donald Trump, which ignited a crisis of confidence in American assets earlier in the year, while Trump’s growing influence over the Federal Reserve also raised concerns about the independence of the central bank.

On the other hand, the euro rose to its highest level in three months at $1.1806, achieving annual gains of more than 14 percent since the beginning of this year, which puts it on track to achieve its best performance since 2003.

The Australian dollar has increased 8.4 percent since the beginning of this year, rising to its highest level in three months at $0.6710 on Wednesday.

The New Zealand dollar touched its highest level in two and a half months at $0.58475, after increasing 4.5 percent during the year.

The British pound rose to its highest level in three months at $1.3531 and achieved annual gains of more than eight percent this year.

The yen rose 0.4 percent in the latest trading at 155.60 to the dollar today, Wednesday, after rising by more than 0.5 percent in the previous session.