Dollar Posts Worst Year Since 2017 With More Fed Cuts Expected

Core Viewpoint - The dollar is expected to experience its most significant annual decline in eight years, with further decreases anticipated if the next Federal Reserve chair implements deeper interest-rate cuts as expected [1]. Group 1: Dollar Performance - The Bloomberg Dollar Spot Index has decreased by approximately 8% this year, facing pressure following Donald Trump's tariffs and his push for a dovish Fed chair [2]. - The dollar gauge saw a temporary rise of 0.2% after a report indicated a drop in US unemployment benefit applications, but it is still projected to end December down about 1% [5]. Group 2: Federal Reserve Influence - The Federal Reserve's decisions, particularly regarding the new chair after Jerome Powell, will be a critical factor for the dollar in the first quarter [3]. - With at least two rate cuts anticipated for next year, the US's monetary policy is diverging from other developed nations, diminishing the dollar's attractiveness [4]. Group 3: Potential Fed Chair Candidates - National Economic Council Director Kevin Hassett is viewed as the leading candidate to replace Jerome Powell, with other names like Kevin Warsh, Christopher Waller, and Michelle Bowman also in consideration [7]. - The market has largely priced in Hassett's potential appointment, while Warsh or Waller may not be as inclined to implement quick rate cuts, which could be more favorable for the dollar [8].