The US dollar is heading for its worst annual performance in over 20 years. Investors are betting that the US Federal Reserve will have room to continue cutting interest rates next year, even as other central banks move to raise them. The dollar continued its decline in Asian trading, as strong US GDP data failed to shift interest rate expectations, prompting investors to price in two more rate cuts next year. According to David Mericle, an economist at Goldman Sachs: 'We expect the Federal Open Market Committee to deliver two more 25-basis-point cuts to bring the rate down to a range of 3% to 3.25%. But we see risks skewed to the downside,' attributing this to slowing inflation. The dollar fell to a two-and-a-half-month low against a basket of currencies at 97.767 and is on track for a 9.9% annual loss, marking its biggest annual drop since 2003. The dollar had a turbulent year, swinging sharply due to tariffs imposed by President Donald Trump that sparked a crisis of confidence in US assets earlier in the year. Meanwhile, Trump's growing influence over the Federal Reserve also raised concerns about the central bank's independence. In contrast, the euro rose to a three-month high of $1.1806, gaining more than 14% since the start of this year, putting it on track for its best annual performance since 2003. The Australian dollar rose 8.4% since the start of the year to a three-month high of $0.6710 on Wednesday. The New Zealand dollar hit a two-and-a-half-month high of $0.58475 after gaining 4.5% in the year. The British pound sterling rose to a three-month high of $1.3531, gaining more than 8% this year. The yen rose 0.4% in the latest session to 155.60 per dollar on Wednesday, after gaining more than 0.5% in the previous session.
