The dollar remained near its highest level in four months on Thursday, as the market continued to digest Republican Donald Trump's victory in the US presidential election, while investors monitored several central bank decisions that will be crowned by those of the Federal Reserve.
The Fed is expected to cut interest rates by 25 basis points later today, and the market will focus on any hints that the U.S. central bank might skip a cut in December.
Last week, the October jobs report came in weaker than expected, raising questions about how weak the labor market is, although the data was clouded by the impact of recent hurricanes and strikes.
The Fed's decision comes in the wake of the U.S. presidential election, with Trump's victory fueling questions about whether the bank can make rate cuts at a slower, shallower pace.
While the former president's return to the White House sparked a “market-boosting” reaction, there were “mixed feelings when you dig deeper into the moves,” said Matt Simpson, senior markets analyst. at City Index.
US stocks at record highs and a weaker yen appeared to be an “endorsement for Trump”, but a stronger dollar and higher US Treasury yields indicated that markets were pricing in a less dovish Fed going forward, he said.
Mr. Trump's policies of restricting illegal immigration, implementing new tariffs, cutting taxes and deregulation could boost growth and inflation and limit the Fed's ability to cut its interest rate.
A complete sweep by Republicans would allow the party to make larger legislative changes and, in turn, likely cause larger currency movements, although control of the House of Representatives remains up in the air.
Following the election, markets now see a roughly 70% chance that the Fed will also cut rates next month, up from 77% on Tuesday, according to the CME Group's Fed Watch tool.
U.S. Treasuries fell sharply on Wednesday, sending yields to multi-month highs [US/].
The dollar index, which measures the greenback against six other currencies, fell 0.05% to 105.06 after hitting its highest level since July 3 at 105.44 in the previous session.
Anything short of a “dovish taper” from the Fed on Thursday could see traders reduce bets for a December cut and the dollar and yields rise, Mr. Simpson added.
The yen was up 0.22% at 154.30 per dollar, after touching 154.7 on Wednesday, its lowest against the greenback since July 30.
The euro < EUR=EBS> stabilized at $1.0731, after falling to $1.068275 for the first time since July 27, while the pound sterling remained behind at $1.2885 .
Ahead of the Fed, the Bank of England is expected to cut interest rates for the second time since 2020, but the big question for investors is whether it sends a signal about its further actions after the government's budget increases inflation.
The Riksbank is expected to ease rates by 50 basis points, and Norges Bank is expected to remain on hold.
Elsewhere, the Australian dollar held steady at $0.6568, consolidating after falling to a three-month low of $0.6513 on Wednesday.
The kiwi traded at $0.5944, up 0.08%.
Bitcoin hovered around Wednesday's record high of $76,499.99, down about 0.66% to $75,490. Trump has also expressed favorable views on cryptocurrencies.
