Nov 20 2024: The U.S. dollar fell to a one-week low against major peers on Wednesday, extending a three-day decline as the market took a breather following a rally sparked by Donald Trump’s election.
Market Dynamics:
- The dollar index dropped to 106.07, recovering slightly to 106.27 by 06:03 GMT, supported by a weakening yen.
- Last week, the index hit a one-year high of 107.07, driven by expectations of fiscal stimulus, higher tariffs, and tighter immigration policies under the Trump administration.
Geopolitical Influences:
Safe-haven currencies like the dollar and yen briefly gained after Russia announced a lowered threshold for nuclear strikes. However, comments from Russia’s foreign minister emphasizing efforts to avoid nuclear war eased market fears.
Bitcoin and Cryptocurrency Optimism:
Bitcoin climbed 0.4% to $92,593, nearing its record high of $94,078.22 reached on Tuesday. Expectations of a cryptocurrency-friendly regulatory environment under Trump, along with reports of his social media company potentially acquiring crypto trading firm Bakkt, buoyed sentiment.
Interest Rate Outlook:
Market expectations for a Fed rate cut in December fell to 58.9%, down from 82.5% a week earlier, according to CME’s FedWatch Tool.
- Fed Chair Jerome Powell remarked that recent robust economic indicators suggest no urgency to lower rates.
- U.S. Treasury yields supported the dollar, pushing it 0.39% higher against the yen to 154.84, recovering from a drop to 153.28 on Tuesday.
Other Currency Movements:
- The euro dipped 0.12% to $1.0585, bouncing back from a low of $1.0524 in the previous session.
- Sterling held steady at $1.2685 ahead of U.K. inflation data, with BoE Governor Andrew Bailey advocating a gradual approach to easing monetary policy.
Outlook for the Dollar:
DBS strategists noted that while the “Trump Trade” faces challenges from controversial cabinet nominations and geopolitical tensions, stronger economic data and the likelihood of a slower Fed rate cut trajectory in 2025 could provide long-term support for the greenback.
