Nov 21 2024: The U.S. dollar stalled its climb on Thursday as traders awaited further clarity on President-elect Donald Trump’s policy proposals and reassessed expectations for interest rate cuts by the Federal Reserve.
Meanwhile, Bitcoin surged toward the $100,000 mark, continuing its strong rally in recent weeks. The cryptocurrency rose to a record high of $97,902, buoyed by reports that Trump’s social media company was in talks to acquire crypto trading platform Bakkt. Bitcoin was last up 2.54%, trading at $96,860.
The dollar index dipped 0.11% to 106.49, though it maintained most of its recent gains, having approached a one-year high of 107.07 last week.
Senior market analyst Matt Simpson at City Index noted that it was difficult to bet against the dollar currently, with markets increasingly factoring in the possibility of no rate cuts from the Fed in December. The CME’s FedWatch Tool now places the likelihood of a December rate cut at just under 54%, down from 82.5% a week ago.
Economists polled by Reuters expect the Fed to cut rates in December, but the cuts are now expected to be shallower through 2025 due to concerns that Trump’s policies could reignite inflation. The dollar has gained more than 2% since the November 5 U.S. presidential election on expectations that Trump’s policies could put upward pressure on inflation and slow the Fed’s rate cuts.
Traders are also scrutinizing Trump’s pledges regarding tariffs, particularly as the European Union and China may be key targets. Bank of Singapore currency strategist Moh Siong Sim commented that the market is currently in a “wait-and-worry” zone, with key details of Trump’s cabinet and policies still unclear. These uncertainties are expected to persist for a few months.
The euro rose 0.09% to $1.0554 after a 0.5% drop on Wednesday, approaching last week’s low of $1.0496, its weakest level since October 2023. The Russia-Ukraine conflict, marked by Ukraine’s use of Western weapons like the British Storm Shadow missiles, has contributed to weaker sentiment for the euro. This, alongside trade tariff concerns, has been a positive factor for the dollar.
Sterling traded slightly higher at $1.2652, up 0.04%.
The U.S. dollar gave up some of its gains against the yen, falling 0.51% to 154.63 yen after comments from Bank of Japan Governor Kazuo Ueda. He indicated that the central bank would seriously consider foreign exchange rate moves in its economic and price forecasts, though there is still time before the December meeting.
The yen has recently weakened, dipping toward 38-year lows, with the market divided on whether the BOJ will raise rates in December. Worries about a weaker yen resurfaced as the dollar traded above 156 yen for the first time since July, prompting speculation that Japan may intervene to support the yen.
