Dollar moves higher as markets focus on Trump’s policies, Fed By Reuters opinion
Written by Brigid Riley
TOKYO (Reuters) – The U.S. dollar held steady on Thursday as traders awaited more clarity on President-elect Donald Trump’s proposed policies and sought to gauge prospects for aggressive interest rate cuts from the Federal Reserve.
After a three-session hiatus, the greenback returned on a march higher, with investors lifting the benchmark against its key rivals near a one-year high of 107.07 last week.
The dollar has gained more than 2% since the November 5 US presidential election on bets Trump’s policies could revive inflation and temper future Fed rate cuts.
At the same time, traders are weighing the implications of Trump’s global tariff campaign, with Europe and China both potentially in the firing line.
“It’s hard to short the USD right now,” as investors also increasingly weigh the possibility that the Fed may not cut rates next month, said senior market analyst Matt Simpson at City Index.
That sentiment was fueled by market volatility, which currently sets the odds of a Fed rate cut at its December meeting at just under 54%, down from 82.5% last week, according to CME’s FedWatch Tool.
A Reuters poll showed most economists expect the Fed to cut rates at its December meeting, with a shallower cut in 2025 than expected last month due to the risk of higher inflation from Trump’s policies.
Separate comments from two Fed governors Michelle Bowman and Lisa Cook on Wednesday provided little clarity on the Fed’s path forward, with one expressing continued concerns about inflation and the other expressing confidence that rate pressures will continue to ease.
The dollar index held firm at 106.56, off a one-week nadir hit in the previous session.
The euro was almost flat at $1.054725 after slipping 0.5% on Wednesday, returning to last week’s low of $1.0496, the weakest against the dollar since Oct. 2023.
“Conflicts between Russia and Ukraine are escalating, which is sad for the euro and the prospect of trade tariffs,” another “brutal indicator” for the dollar index given the euro’s dire straits, City Index’s Simpson said.
Ukraine fired a volley of British Storm Shadow cruise missiles into Russia on Wednesday, the latest weapon the West has approved to use against Russian targets a day after it fired a US ATACMS missile.
The dollar gave up some gains against the yen, down 0.33% at 154.91 yen, although the Japanese currency remained under pressure.
The currency pair rose above the 156 mark last week for the first time since July, raising concerns that Japanese authorities may take further steps to boost the yen.
The focus will be on Bank of Japan Governor Kazuo Ueda, who is scheduled to speak at a financial forum in Paris on Thursday after leaving the door open to a December rate hike in moderate remarks earlier in the week.
Investors will be watching for any strong signs that a year-end rate hike is on the cards, as market prices are almost evenly split amid the yen’s latest slide toward a 38-year low touched in July.
Sterling was up 0.07% at $1.2656. Data on Wednesday showed inflation in Britain jumped more than expected last month to rise above the Bank of England’s target of 2%, supporting the central bank’s cautious approach to interest rate cuts.
Elsewhere, bitcoin reached a record high of $95,016 on Wednesday, supported by a report that Trump’s communications company was in talks to buy crypto trading company Bakkt.
it has drifted into a frenzy over the past few weeks in the hope that the president-elect will create a friendly regulatory environment for cryptocurrencies.
