The U.S. dollar remained broadly firm on Thursday as traders waited for more clarity on policies proposed by President-elect Donald Trump and sought to question prospects for less aggressive interest rate cuts from the Federal Reserve.
After stagnating for three sessions, the greenback started to rise again, with investors pushing the dollar index against its main rivals closer to its one-year high of 107.07 reached last week.
The dollar has risen more than 2% since the Nov. 5 U.S. presidential election, as Mr. Trump's policies could reignite inflation and temper future Fed rate cuts.
At the same time, traders are weighing what Mr. Trump's tariff promises during his campaign mean for the rest of the world, with Europe and China likely in the crosshairs.
“It's difficult to short the dollar right now as investors increasingly price the Fed not cutting rates next month,” said Matt Simpson, senior market analyst at City Index. .
This sentiment has been fueled by sharp swings in market prices, which currently peg the odds of a Fed rate cut at its December meeting at just under 54%, down from 82.5% ago. a week, according to the CME's FedWatch tool.
A Reuters poll showed that most economists expect the Fed to cut rates at its December meeting, with smaller cuts in 2025 than expected a month ago, due to the risk of a higher inflation due to Trump's policies.
Separate comments from two Fed governors, Michelle Bowman and Lisa Cook, on Wednesday did not provide much clarity on the Fed's path forward, with one citing lingering concerns about inflation and the other expressing confidence that pricing pressures will continue to ease.
The dollar index held steady at 106.56, up from its one-week low reached in the previous session.
The euro remained almost flat at $1.054725 after slipping 0.5% on Wednesday, returning to last week's low of $1.0496, its lowest level against the dollar since October 2023.
“The conflict between Russia and Ukraine is escalating, weighing on sentiment towards the euro, as is the prospect of tariffs, another bullish sign for the dollar index given the heavy weighting of the 'euro,' said Mr. Simpson of City Index.
Ukraine fired a volley of British Storm Shadow cruise missiles at Russia on Wednesday, the latest new Western weapon it has been authorized to use on Russian targets, a day after firing US ATACMS missiles.
The dollar gave up some gains against the yen, falling 0.33% to 154.91 yen, although the Japanese currency remained under pressure.
Last week, the currency pair rose above the 156 mark for the first time since July, raising concerns that Japanese authorities could again take steps to support the yen.
The focus will be on Bank of Japan Governor Kazuo Ueda, who is due to speak at a financial forum in Paris on Thursday, after leaving the door open to a December rate hike in balanced remarks to the start of the week.
Investors will be on the lookout for any stronger indication that a year-end rate hike is on the cards, with market prices almost evenly split amid the yen's recent slide back toward the 38s the lowest reached in July.
The British pound was up 0.07% at $1.2656. Data on Wednesday showed UK inflation rose more than expected last month to move back above the Bank of England's 2% target, supporting the central bank's cautious approach to cuts. interest rate.
Elsewhere, bitcoin hit a record high of $95,016 on Wednesday, buoyed by a report that Trump's social media company was in talks to buy cryptocurrency exchange firm Bakkt.
Bitcoin has been driven into a meteoric rally in recent weeks on hopes that the president-elect will create a more favorable regulatory environment for cryptocurrencies.
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