Dollar Nears 3-Week High Before Fed's Move; Bitcoin Breaks $105,000

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The U.S. dollar remained near a three-week high against major currencies on Monday, driven by expectations that the Federal Reserve will cut interest rates this week but signal a cautious approach to further easing in 2025.

Bitcoin surged past $105,000 for the first time, fueled by speculation that President-elect Donald Trump will proceed with his plan for a U.S. strategic bitcoin reserve.

The yen struggled to recover after its worst week since September, as reports emerged suggesting that the Bank of Japan is likely to hold off on a rate hike on Thursday.

Sterling faced pressure after data released on Friday revealed an unexpected economic contraction. The Bank of England is expected to announce its policy decision shortly after the BOJ’s announcement.

The dollar also received support from rising U.S. Treasury yields. While traders expect a quarter-point rate cut from the Fed on Wednesday, they now anticipate no further rate cuts in January, according to CME's FedWatch tool.

Despite inflation remaining above the Fed's 2% target, policymakers have indicated that recent upticks are part of a gradual path to reducing inflation and not a reversal of the disinflationary trend. However, analysts caution that inflation could rise if the economy overheats, especially with Trump’s administration potentially pursuing inflationary policies.

The U.S. dollar index, which tracks the currency against major rivals like the euro, sterling, and yen, was steady at 106.86, after rising to 107.18 on Friday, its highest since November 26.

The dollar added 0.1% to 153.87 yen, reaching 153.91, its highest level since November 26.

Sterling gained 0.18%, rising to $1.26315 from its Friday low of $1.26075, the lowest since November 27.

The euro increased 0.12% to $1.05155, recovering slightly from its end-of-week low of $1.045375, the weakest since November 26.

Bitcoin jumped by as much as 3.6%, reaching a new all-time high of $106,533. Trump’s comments on CNBC about establishing a U.S. bitcoin reserve, similar to the strategic oil reserve, helped drive the surge. Trump had previously pledged to make the U.S. the "crypto capital of the planet."

Tony Sycamore, an analyst at IG, noted that the interview sparked the bitcoin rally, and the next milestone to watch is $110,000.

 

 

 

 

 

 

 

 

Paraphrasing text from "Reuters" all rights reserved by the original author.