Markets are betting that the Federal Reserve's tightening cycle may end, contributing to the U.S. currency's weakness.
The first trading day of the year was generally subdued, as many countries, including important trading centers such as Britain and Japan, were closed for the holiday. The dollar index, which measures the dollar value against a basket of major currencies, rose by about 0.14% to 103.63, slightly above the six-month lows it hit last week at around 103.38.
The euro slipped by about a third of a percent to $1.0683, but it remained close to its highest levels since June. Sterling was down 0.35% at $1.2051. Against
Global Economy Faces Tough Year Ahead
The global economy is facing a challenging year ahead, according to International Monetary Fund Managing Director Kristalina Georgieva. In addition, data from China showed that factory activity shrank for the third straight month in December, at the sharpest pace in nearly three years.
However, a downturn in eurozone manufacturing activity may have passed its lowest point as supply chains recover and inflationary pressures ease. A survey conducted on Monday showed that S&P Global's final manufacturing Purchasing Managers' Index rose to 47.8 in December, up from November's 47.1, matching a preliminary reading but still below the 50 mark that separates growth from contraction.
While the euro area economy is heading towards a recession, concerns about gas supply over the winter have eased, meaning that the downturn may not be as severe as previously feared. Eurozone wages are also growing faster than expected, and European Central Bank Chief Christine Lagarde has stated that the ECB must prevent this from adding to already high inflation.