The US dollar remained steady near a five-week low on Thursday, supported by weak economic data that strengthened expectations for a Federal Reserve rate cut next week. The euro surged to a near seven-week high, while the Japanese yen recovered slightly from recent lows.
Traders are pricing in an 85% chance of a quarter-point Fed rate cut at the December 10–11 meeting.
Commerzbank FX analysts Thu Lan Nguyen and Antje Praefcke noted, “A Fed rate cut next week is already priced in. What will be decisive for the dollar, though, is whether there will be new hints regarding the direction of monetary policy in subsequent meetings.”
Investor attention is also on potential changes at the Federal Reserve. Reports indicate that White House economic adviser Kevin Hassett may succeed Jerome Powell as Fed Chair in May, and he is expected to favour further rate cuts.
Concerns over aggressive easing by Hassett have already put pressure on the dollar, with bond investors expressing worries to the US Treasury, the Financial Times reported.
The dollar index, which tracks the currency against six major rivals, was little changed at 98.94, remaining down nearly 9% for the year after nine consecutive days of decline.
Analysts caution that the strong US economy may limit how far the dollar could fall, despite expectations of medium-term rate cuts.
The euro eased slightly to $1.1657 but stayed near its highest level since October 17, supported by euro zone business activity expanding at its fastest pace in 30 months. The currency has risen more than 12% this year, marking its strongest annual gain since 2017, boosted by a weaker dollar and rising likelihood of US rate cuts.
Meanwhile, the yen held at 155.22 per dollar, slightly recovering from a 10-month low amid easing intervention fears.
Sources familiar with Bank of Japan deliberations suggest the central bank is likely to raise rates in December, though the post-hike path remains uncertain.
Wells Fargo’s Chidu Narayanan said, “A still cautious BOJ, attractive carry for long dollar/yen and persistent topside pressure to JGB yields on potential fiscal expansion is likely to keep the pressure on yen weakness.”
Sterling remained near a three-week high at $1.3337, while the Swedish crown dipped after slowing annual inflation. The Chinese yuan edged lower but stayed close to a 14-month high following a series of weaker-than-expected official midpoints set by the People’s Bank of China.
Reuters
