# Dollar set for biggest two-day fall since 2009 as rate outlook shifts Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-11-11 Category: TRADING Category URL: https://financedigest.com/category/trading Meta Title: US Dollar Drops as Risk Appetite Rises amid Slowing Meta Description: Investors shift to riskier assets as dollar plunges; inflation slows, prompting moderation in rate hike expectations by the Federal Reserve. URL: https://financedigest.com/dollar-set-for-biggest-two-day-fall-since-2009-as-rate-outlook-shiftshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-11-11t064534z1lynxmpeiaa07yrtroptp4china-health-economy-1736814881199-compressed.jpg) By Amanda Cooper LONDON (Reuters) -The dollar headed for its biggest two-day drop in almost 14 years on Friday, as investors piled into riskier assets after a cooler reading of U.S. [inflation helped temper expectations](https://www.financedigest.com/dollar-drops-as-inflation-cools-more-than-expected.html "Dollar drops as inflation cools more than expected") for the Federal Reserve to keep raising rates as quickly. [Data on Thursday showed consumer inflation](https://www.financedigest.com/dollar-dips-ahead-of-inflation-data-later-this-week.html "Dollar dips ahead of inflation data later this week") rose 7.7% year-on-year in October, its slowest rate since January and below forecasts for 8%. The dollar staged its [biggest drop since](https://www.financedigest.com/uk-firms-plan-biggest-pay-rises-since-2012-to-fill-staff-gaps.html "UK firms plan biggest pay rises since 2012 to fill staff gaps") late 2015 on Thursday as Treasury yields plunged, while other currencies – the yen and the pound in particular – jumped. [Investor risk appetite got an additional boost](https://www.financedigest.com/aviva-boosts-investor-payouts-after-profit-beat.html "Aviva boosts investor payouts after profit beat") from Chinese health authorities easing some of the country’s strict COVID-19 restrictions, including shortening quarantine times for close contacts of cases and inbound travellers. The dollar index was down nearly 1.1%, having lost over 3% in the last two days – its biggest two-day decline [since March](https://www.financedigest.com/the-nasdaq-100-on-track-to-have-its-best-week-since-march-2010.html "The Nasdaq 100 On Track to Have its Best Week Since March 2010") 2009. Risk assets including [stocks](https://www.financedigest.com/mutual-funds-vs-stocks-which-is-better.html "stocks"), emerging-market currencies and commodities rallied. But [slowing inflation](https://www.financedigest.com/spains-12-month-inflation-slows-down-again-in-december-to-5-8.html "Spain’s 12-month inflation slows down again in December to 5.8%"), while positive for borrowers, reflects a slowing economic backdrop, analysts said. “It can be a little dangerous in that the ‘bad news’ is still out there and could come back to burn us, particularly with respect to the Fed,” Rabobank currency strategist Jane Foley said. The [dollar has risen by 12% this year](https://www.financedigest.com/dollar-creeps-up-in-subdued-start-to-new-year.html "Dollar creeps up in subdued start to new year") against a basket of major currencies, in light of the Fed’s determination to bring inflation, which almost hit double digits earlier this year, back towards its target of 2%. Other central banks have followed suit, with the exception of the Bank of Japan, and, as a result, the [yen has witnessed its largest decline against the dollar](https://www.financedigest.com/yen-sinks-as-rates-outlook-diverges-nz-dollar-tumbles.html "Yen sinks as rates outlook diverges; NZ dollar tumbles") since 1979. The dollar, which has [gained 22% in value against the yen](https://www.financedigest.com/japanese-yen-gains-as-ueda-set-to-be-named-next-boj-governor.html "Japanese yen gains as Ueda set to be named next BOJ governor") this year, its steepest gain since 1979’s 24% rise, was last down 1% against the Japanese currency at 139.54 yen. The futures [market shows investors are pricing](https://www.financedigest.com/uk-housing-market-may-face-perfect-storm-as-mortgage-rates-rise-house-prices-drop.html "UK housing market may face perfect storm as mortgage rates rise, house prices drop") in a 71.5% chance of a 50-basis-point U.S. [rate increase](https://www.financedigest.com/how-to-increase-repeat-purchase-rates-in-ecommerce.html "How to increase repeat purchase rates in eCommerce") next month, up from around 50/50 a week ago. We remain reluctant to [jump in on the broader bearish dollar](https://www.financedigest.com/dollar-jumps-as-powell-flags-higher-terminal-rate.html "Dollar jumps as Powell flags higher terminal rate") story just yet. First, because it simply appears too early to call victory in the [inflation battle](https://www.financedigest.com/swiss-national-bank-says-inflation-battle-not-yet-won.html "Swiss National Bank says inflation battle not yet won"), and more evidence will need to come from the jobs markets – which has remained exceptionally tight,” ING strategist Francesco Pesole said. The yuan also jumped, as [investors cheered](https://www.financedigest.com/despite-the-headwinds-investors-have-important-reasons-to-be-cheerful.html "DESPITE THE HEADWINDS, INVESTORS HAVE IMPORTANT REASONS TO BE CHEERFUL") the slight relaxation in China’s COVID rules, despite cases rising sharply across the country. The offshore yuan rallied by as much as 1.3% to [hit its highest in over a month against the dollar](https://www.financedigest.com/pound-hits-10-month-peak-euro-up-as-dollar-under-pressure.html "Pound hits 10-month peak, euro up as dollar under pressure"), to 7.0592. Sterling, meanwhile, pared overnight losses against the dollar and the euro after UK [data showed the economy](https://www.financedigest.com/stocks-yields-fall-data-suggests-u-s-economy-cooling.html "Stocks, yields fall; data suggests U.S. economy cooling") did not contract by as much as expected in the three months to September, although it is still entering what is likely to be a lengthy recession. The pound rose 0.7% against the dollar to $1.179, having staged its [largest one-day rally the day before since](https://www.financedigest.com/first-quarter-dash-for-cash-largest-since-early-2020-bofa.html "First quarter ‘dash for cash’ largest since early 2020 -BofA") 2017, while against the euro it fell 0.4% to 87.47 pence. The [euro extended the previous day’s 2% surge to rise](https://www.financedigest.com/euro-rises-after-spanish-cpi-dollar-slips-towards-8-mth-low.html "Euro rises after Spanish CPI, dollar slips towards 8-mth low") 1.0% to $1.0311, trading around its highest since August. It also briefly hit session lows versus the Swiss franc, after the head of the Swiss National Bank reiterated the central [bank’s commitment to bring inflation](https://www.financedigest.com/boes-bailey-says-rate-setters-can-put-inflation-before-bank-worries.html "BoE’s Bailey says rate-setters can put inflation before bank worries") down. Against the franc, the euro was last down 0.42% at 0.9795. Cryptocurrencies were under pressure again, given ongoing turmoil in the [crypto world after exchange](https://www.financedigest.com/exclusive-binance-moved-346-million-for-seized-crypto-exchange-bitzlato-data-show.html "Exclusive-Binance moved 6 million for seized crypto exchange Bitzlato, data show") FTX’s fall. FTX’s native token, FTT, was [last down 7.4% at $3.45 having fallen nearly 90% this month](https://www.financedigest.com/fintech-trends-to-look-out-for-during-the-last-six-months-of-2019.html "Fintech trends to look out for during the last six months of 2019"). Bitcoin fell 1.3% to $17,348, after plunging below $16,000 for the first [time since](https://www.financedigest.com/soccer-arsenal-reach-womens-champions-league-semis-for-first-time-since-2013.html "Soccer-Arsenal reach Women’s Champions League semis for first time since 2013") late 2020 this week. (Additional reporting by Rae Wee in Singapore. Editing by Shri Navaratnam, John Stonestreet, Chizu Nomiyama and Mark Heinrich) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---