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Currency Trading: Dollar Posts Its Biggest Annual Decline in 10 Years -- WSJ

30 Dec 2017 7:32 am
By Daniel Kruger 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 30, 2017).

The U.S. dollar fell Friday, posting its largest yearly percentage drop in a decade.

The Wall Street Journal Dollar Index, which measures the U.S. currency against a basket of 16 others, fell 0.3%, losing ground against the euro. The dollar snapped a five-year winning streak, dropping 7.5% in 2017, its biggest annual decline since 2007.

The euro was supported by preliminary German inflation data for December that showed that consumer prices rose 1.6% from last year, when harmonized for European Union data, Germany's Federal Statistical Office said Friday. Prices also rose 0.6% from the previous month.

The euro climbed 0.5% against the greenback, rising above the $1.20 level to $1.2003, gaining 14% in 2017 and breaking a three-year losing streak against the dollar.

Investors have favored the euro versus the dollar throughout much of 2017, as faster-than-expected growth in Europe prompted investors to speculate that officials can tighten monetary policy sooner and faster than had previously been expected. Higher interest rates tend to make a currency more attractive to yield-seeking investors.

The European Central Bank is reducing its monthly bond purchases to EUR30 billion in January from EUR60 billion. The ECB had earlier scaled back its purchases from EUR80 billion in April.

Despite the Fed's interest-rate increases, many investors have shied away from the dollar, thinking that impact of rate increases on the currency diminish "the farther along the Fed gets in the tightening cycle," said Erik Nelson, a currency strategist at Wells Fargo Securities. "A lot of rebalancing needs to go on for a lot of portfolio managers."

Write to Daniel Kruger at Daniel.Kruger@wsj.com

(END) Dow Jones Newswires

December 30, 2017 02:32 ET (07:32 GMT)

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