The U.S. dollar remained near a three-week peak against its major peers on Monday amid expectations that the Federal Reserve will cut interest rates this week but then indicate a rate of relaxation measured for 2025.
Bitcoin climbed above $105,000 for the first time, buoyed by signs that President-elect Donald Trump will move forward with a potential strategic bitcoin reserve.
The yen struggled to recover after its worst week since September, after Reuters and other news outlets reported that the Bank of Japan was considering forgoing a rate hike on Thursday.
Sterling also came under pressure after data on Friday showed a surprise economic contraction. The Bank of England is expected to announce a policy decision a few hours after the BOJ.
The dollar received additional support from rising US Treasury yields. According to the CME's FedWatch tool, traders are confident of a quarter-point cut in the Fed's interest rate on Wednesday, but now expect officials to forgo a cut in January.
As inflation exceeds the central bank's 2% annual target, Fed policymakers said the recent increases are part of a rocky path toward easing inflation pressures. on prices and did not constitute a reversal of the disinflationary trend.
However, analysts say they are also likely to be wary of a pickup in inflation as Mr. Trump takes office in January.
“The U.S. economy has been resilient to high interest rates, which means the potential for higher inflation if the economy overheats is an issue the Fed will need to address,” James Kniveton said , senior foreign exchange trader at Convera.
“There are concerns that the incoming administration's policies are inflationary, but as the Bank of Canada governor commented earlier this month, decisions cannot be based on potential U.S. policy, and (the president of the Fed) Jerome Powell could follow suit.”
The Dollar Index – which tracks the currency's performance against the euro, pound sterling, yen and three other major rivals – was steady at 106.86 at 00:53 GMT, after rising to 107.18 Friday for the first time since November 26.
The US currency added 0.1% to 153.87 yen, and earlier touched 153.91 for the first time since November 26.
Sterling rose 0.18% to $1.26315, after hitting $1.26075 on Friday, its lowest point since November 27.
The euro rose 0.12% to $1.05155, after falling to $1.045375 late last week, its lowest point since November 26.
Bitcoin jumped as much as 3.6% from Sunday's close to hit an all-time high of $106,533.
In an interview with CNBC on Friday, Trump hinted that he was considering establishing a strategic bitcoin reserve in the United States, similar to the strategic oil reserve.
During his election campaign, Mr. Trump promised to make the United States “the crypto capital of the planet.”
According to Tony Sycamore, an analyst at IG, the CNBC interview “was a little slow, but it has now helped bitcoin surpass $105,000.”
“We are in a blue sky area, and the next number the market will look to reach is $110,000.
