The U.S. dollar held steady against the yen and other major rivals on Wednesday as investors wait to see whether the Federal Reserve will make a cut before the Bank of Japan and other central banks meet this week .
The Fed is expected to cut interest rates by 25 basis points at the end of its two-day meeting on Wednesday, with a probability of 97%, according to the CME’s FedWatch tool.
The focus will be on policymakers’ new economic projections for the coming year, released alongside the decision, on how much further Fed officials think they will cut interest rates in 2025 .
Given the robust data set on inflation and activity, the Fed could signal a slower pace going forward, revising projections to indicate three cuts in 2025 instead of the current four, Tony Sycamore wrote, market analyst at IG, in a note to his clients.
“If the midpoint showed only two cuts, that might be considered more hawkish, (although) it would align with current pricing in the rates market,” he said.
Retail sales beat expectations by increasing 0.7% in November, supported by a rise in motor vehicle purchases and online shopping.
Investors are also weighing the possible impact of tariffs and tax cuts promised by the incoming Trump administration on the Fed’s outlook.
The Dollar Index, which measures the greenback against six rivals, was little changed, down 0.04 percent at 106.89 after hitting its highest level since Nov. 26 at 107.18 on Monday.
Against the yen, the dollar was up 0.12% at 153.65, having given up some of its recent gains in the previous session as US Treasury yields fell ahead of the Fed’s decision. [US/]
Markets sharply reduced the Bank of Japan’s (BOJ) bets on a rate increase on Thursday, in favor of a January increase, following a series of media reports indicating the bank may take a cautious stance.
Japanese exports rose for the second consecutive month in November, data showed Wednesday.
The Bank of England is also expected to hold rates on Thursday. Investors further reduced their bets on cuts next year after data on Tuesday showed UK wage growth accelerated more than expected.
Sterling was almost flat at $1.27095 ahead of November CPI figures due out later today.
The euro settled at $1.0502, up 0.09%.
Among other central banks meeting this week, Sweden’s Riksbank is expected to cut rates by half a point, while Norges Bank is expected to leave rates unchanged.
The Swedish krona held steady at 10.9469. The Norwegian krone hovered around 11.1793 against the greenback.
Elsewhere, the offshore yuan traded at 7.2885 per dollar, not far from a 13-month low hit against the dollar on Tuesday, amid gloomy expectations for Chinese economic growth.
The Australian dollar, which tends to act as a liquid proxy for the yuan, plunged 0.17% to $0.6326 against the greenback, its lowest since November 2023.
The kiwi reached $0.57565, up 0.04%.
In cryptocurrencies, bitcoin fell 0.54% to $105,836.57 after reaching a high of $108,379.28 in the previous session.
