Currencies: Dollar set to suffer worst year since 2003 with 10% yearly loss

The dollar continued to decline on Friday, falling against all other major currencies and heading for its biggest yearly loss since 2003.

Trading was thin on Friday — the last session of the year — as many investors were expected to stay away until after the New Year holiday,

Where are currencies trading?

The ICE U.S. Dollar Index DXY, -0.39%  , a measure of the dollar against a basket of six major rivals, fell 0.2% to 92.423, trading around its lowest level since September.

For 2017, the index was down 9.6% with just a few trading hours left of the year. That would mark its biggest one-year loss since 2003, when it finished 14.6% lower. It would also be the first yearly loss for the greenback since 2012.

The WSJ Dollar Index BUXX, -0.28%  was down 0.3% 86.00 on Friday.

The euro EURUSD, +0.3098%  rose to $1.1973, up from $1.1943 late Thursday in New York. The shared European currency has jumped 14% against the greenback this year.

Read: European stocks set for a winning 2017, but euro’s rise was a challenge

The pound GBPUSD, +0.3645%  climbed to $1.3505 from $1.3442 on Thursday. Sterling has risen 9.4% against the dollar in 2017.

The yen USDJPY, -0.27%  also advanced on Friday, with the dollar buying ¥112.56 compared with ¥112.87 on Thursday.

What’s driving markets?

Falling U.S. bond yields were cited as one reason for the recent dollar weakness. Falling yields are generally bearish for the home currency and on Wednesday, the yield for the benchmark 10-year Treasury note TMUBMUSD10Y, -0.10%  saw its biggest one-day drop in more than three months.

Expectations for higher interest rates from the Federal Reserve have also failed to give the dollar a lift.

What are strategists saying?

“2017 has been marked by persistent dollar weakness and with year-end flows easing it will close out the year in the same way,” said Kathy Lien, managing director of FX strategy for BK Asset Management, in a note.

“Part of the weakness can be attributed to U.S. data, which came in mostly weaker [Thursday]. The trade deficit increased rather than narrowed in November, jobless claims did not improve although manufacturing activity in the Chicago region accelerated,” she added.

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