The dollar is close to wiping out all of its gains last year, perhaps because the market is betting that the Federal Reserve will cut interest rates faster than expected.

The Federal Reserve's decision to kick off its easing with a big 50 basis point rate cut weighed on the dollar as debate intensified over how much the central bank would cut in the future. Traders on Tuesday increased bets on further rate cuts, pricing in a 50% chance of another 50 basis point cut in November. The dollar is on the verge of erasing all of its gains this year as markets bet the Fed will cut rates faster than expected to support the economy. While the Bloomberg Dollar Spot Index rose slightly on Wednesday, it remained near its lowest level since December. The dollar was near its lowest level against the euro in more than a year and at its lowest level against the pound in two and a half years. Short-term Treasury yields moved higher as traders increased bets on further rate cuts, with the two-year Treasury yield falling to its lowest level since the end of 2022, further flattening the U.S. yield curve. (Jinshi)