The U.S. dollar stood broadly firm on Thursday as traders awaited more clarity on U.S. President-elect Donald Trump's proposed policies and sought to second-guess the prospects of less aggressive interest rate cuts from the Federal Reserve.
After stalling for three sessions, the greenback was back on the march higher, with investors lifting the dollar index measure against its key rivals closer to a one-year high of 107.07 hit last week.
The dollar has rallied more than 2% since the Nov. 5 U.S. presidential election on bets Trump's policies could reignite inflation and temper the Fed's future rate cuts.
At the same time, traders are sizing up what Trump's campaign pledges of tariffs mean for the rest of the world, with Europe and China both likely on the firing line.
That sentiment was driven by sharp swings in market pricing, which currently sets the odds of a Fed rate cut at its December meeting at just under 54%, down from 82.5% just a week ago, according to CME's FedWatch Tool.
A Reuters poll showed most economists expect the Fed to cut rates at its December meeting, with shallower cuts in 2025 than expected a month ago due to the risk of higher inflation from Trump's policies.
The dollar index held steady at 106.56, up from a one-week nadir hit in the previous session.
The euro was nearly flat at $1.054725 after slipping 0.5% on Wednesday, back toward last week's low of $1.0496, its weakest against the dollar since Oct. 2023.
The dollar gave up some gains against the yen, down 0.33% at 154.91 yen , although the Japanese currency remained under pressure.
The currency pair rose above the 156 mark last week for the first time since July, stirring worries that Japanese authorities may again take steps to shore up the yen.
Investors will be looking for any stronger indication that a year-end rate hike is in the cards, with market pricing nearly evenly split amid the yen's recent decline back toward the 38-year-lows touched in July.
Sterling was up 0.07% at $1.2656. Data on Wednesday showed British inflation jumped more than expected last month to rise back above the Bank of England's 2% target, supporting the central bank's cautious approach on interest rate cuts.
Source: Reuters
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