The dollar index weakened below 102 in holiday-thinned on Monday, hitting its lowest levels in over seven months as easing US inflation and related expectations sparked hopes for less aggressive interest rate hikes from the Federal Reserve. The annual inflation rate in the US slowed for a sixth straight month to 6.5% in December, in line with market forecasts. That was also the lowest reading since October 2021, raising hopes that inflation peaked in June at 9.1%. Money markets are now pricing an over 90% chance that the central bank will downshift to a smaller 25 basis point rate hike in February after delivering a half-percentage point increase in December. The dollar weakened across the board, with the most pronounced selling against the risk-sensitive New Zealand and Australian dollars.
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