Currencies: Dollar suffers worst year since 2003 with 10% yearly loss

The dollar sank on Friday, falling against all other major currencies and clinching 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, -0.52% a measure of the dollar against a basket of six major rivals, fell 0.5% to 92.181, trading around its lowest level since September.

For 2017, the index was down 9.8%. That marks its biggest one-year loss since 2003, when it finished 14.6% lower. It was also the first yearly loss for the greenback since 2012.

The WSJ Dollar Index BUXX, -0.34%  was down more than 0.3% to 85.89 on Friday.

The euro EURUSD, +0.5610%  rose to $1.2023, 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, +0.5505%  climbed to $1.3521 from $1.3442 on Thursday. Sterling has risen 9.4% against the dollar in 2017.

The yen USDJPY, -0.20%  also advanced on Friday, with the dollar buying ¥112.60 compared with ¥112.87 on Thursday.

What’s driving markets?

Expectations for higher interest rates from the Federal Reserve have also failed to give the dollar a lift. That’s in part because foreign-exchange traders have paid closer attention to the greenback’s rivals that have suffered from years of weakness against the dollar. Investors have rushed into the euro and the yen on an expectation the Bank of Japan and European Central Bank would shift away from ultra-accommodative monetary policy in 2018.

The dollar’s slide this year has come as a surprise for some who thought the Republican tax bill would spark a rebound. The thinking is that the repatriation of profits and cash from overseas will buoy the greenback. But estimates of how much companies could bring back to the U.S. vary widely from as low as $50 billion to $3 trillion

Check out: Why tax repatriation won’t jolt the U.S. dollar

Falling U.S. bond yields were cited as one reason for the dollar weakness this week. Falling yields are generally bearish for the home currency and on Wednesday, the yield for the benchmark 10-year Treasury note TMUBMUSD10Y, -0.96%  saw its biggest one-day drop in more than three months.

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.

“To be sure, the USD did fall during 2017, although that decline came from heightened levels following the election outcome and subsequent USD surge. In that context, the decline in the USD is somewhat exaggerated,” wrote Robert Sinche, global macro strategist for Amherst Pierpoint Securities.

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