Dollar Climbs Amid Expectations for Fed’s “Cut-Then-Wait” Strategy
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The dollar climbed to its highest level in 2.5 weeks on Friday, showing its strongest weekly performance in a month. This gain was fueled by expectations that the Federal Reserve would reduce interest rates at its next meeting while adopting a cautious stance toward further cuts.
The U.S. currency gained momentum against the euro and Swiss franc, both of which saw rate cuts by their central banks the previous day. It also strengthened against the yen amid speculation that the Bank of Japan might refrain from a rate hike in its upcoming meeting. The dollar index, which measures the greenback's performance against six major currencies, rose to 107.15, marking a 1.1% weekly gain.
U.S. economic data played a key role in bolstering the dollar. Despite softer producer price figures, signs of a cooling labor market and persistently high inflation solidified expectations for a Fed rate cut on December 18. Traders assigned a 23% probability to an additional rate cut in January, according to CME’s FedWatch tool.
San Francisco Fed President Mary Daly supported a December rate cut but emphasized a cautious approach to future reductions, citing progress in inflation and economic performance.
The dollar also rose 0.3% against the yen, reaching 153.09, its highest since late November, reflecting uncertainty about a potential BOJ rate hike. Meanwhile, the dollar gained 1.6% against the Swiss franc after a surprise half-point rate reduction by the Swiss National Bank.
The euro dipped to $1.0457 following the European Central Bank's rate cut and its openness to further easing. Sterling slipped slightly to $1.2658, and the Canadian dollar hit a 4.5-year low due to rate cuts and tariff concerns. In Asia, the yuan weakened further amid trade war fears, and the Australian dollar slid after labor market data failed to sustain a brief rebound.
Bitcoin steadied at $99,970, consolidating near its record high of $103,649 reached earlier in the month.
Paraphrasing text from "Reuters" all rights reserved by the original author.
