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NEW YORK: The US dollar slid against most major currencies on Monday, with a measure tracking the greenback’s value on track for its biggest monthly drop in a year, weighed down by expectations that the Federal Reserve could start cutting interest rates by the first half of next year.

The dollar index, which measures the currency against six major peers, slipped 0.1% to 103.37 and was headed for a monthly loss of more than 3%, its worst performance since November 2022.

Helen Given, FX trader at Monex USA in Washington, said the increased chances of earlier rate cuts by the Fed in 2024 compared with the European Central Bank and the Bank of England are “combining to pressure the dollar today.”

Market pricing shows a roughly 23% chance that the Fed may begin easing monetary policy as early as March, according to the CME Group’s FedWatch Tool. In May, that probability rises to about 50% at the Fed’s May meeting.

Investors are also looking to a slew of events and data this week that could determine the future path of interest rates globally.

A postponed OPEC+ meeting, the release of the Fed’s preferred gauge of inflation - the personal consumption expenditures (PCE) price index - as well as consumer price data in the euro zone and Australia fill this week’s calendar. The market is also eyeing a rate decision from the Reserve Bank of New Zealand and Chinese purchasing managers’ index (PMI) data.

In other currencies, the euro was little changed against the dollar at $1.0937. On the month, the euro has gained about 3.4%, on pace for its largest monthly rise in a year.

Europe’s single currency showed little reaction to ECB President Christine Lagarde’s remarks on Monday that euro zone inflation pressures are easing but wage growth is still strong, so the ECB’s fight to contain price growth is not yet done

Against the yen, the dollar fell 0.4% to 148.885 yen. For the month of November, the US currency has fallen nearly 2%, on pace for its biggest monthly fall since February.

The dollar extended losses after data showed US new home sales fell more than expected in October,

dropping 5.6% to a seasonally-adjusted annual rate of 679,000 units. September’s sales pace was revised lower to 719,000 units from the previously reported 759,000 units.

“I don’t see much potential for a turnaround until later this week when Q3 GDP (gross domestic product) numbers are released Wednesday morning,” said Monex’s Given.

Elsewhere, the British pound rose against the weaker dollar to more than a two-month high of $1.2644, extending its gains from last week following data showing that British companies unexpectedly reported a marginal return to growth in November after three months of contraction. The pound was last up 0.1% at $1.2621.

The Australian dollar climbed to more than a three-month high against the greenback of US$0.6614, while the New Zealand currency was up 0.2% to US$0.6091 before the RBNZ interest rate decision on Wednesday. The RBNZ is expected to keep its official cash rate unchanged at 5.5%, as it has been since the last adjustment in May.

In China, the yuan slipped after the official midpoint snapped five straight sessions of strengthening, with the onshore yuan last at 7.1528 per dollar.

Its offshore counterpart fell 0.2% to 7.1623 per dollar.

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