The U.S. dollar was little changed on Thursday (August 28th) as traders increased bets for a Fed rate cut next month after New York Fed Chairman John Williams hinted at the possibility of a rate cut.

The U.S. currency is again under pressure from President Donald Trump's intensifying campaign to exert more influence over monetary policy decisions, as he seeks to oust Fed Chair Lisa Cook and replace her with a loyalist.

The dollar weakened against the euro even after the French Prime Minister unexpectedly called for a no-confidence vote next month on Monday, which would likely lead to the collapse of his minority government. The Fed's Williams said in an interview with CNBC on Wednesday that it was likely interest rates would fall at some point, but policymakers would need to look at upcoming economic data to decide whether a rate cut at the September 16-17 meeting was the right decision.

The main data releases before the meeting are the PCE price index on Friday—the Fed's preferred inflation measure—and the monthly payrolls report a week later. Traders are currently pricing in about an 89% chance of a quarter-point rate cut next month, and have priced in a cumulative 55 basis points of easing by the end of the year, according to LSEG data. This has also pushed the yield on the two-year Treasury note, which is sensitive to policy expectations, to its lowest level since May 1, adding pressure on the dollar.

President Trump's efforts to install dovish candidates on the central bank's decision-making committee have also lowered short-term yields, although his attack on Governor Cook could trigger a protracted legal battle after he files a lawsuit to retain his position.

"Short-term U.S. bond yields remain near recent lows, and most would conclude that President Trump's (attempted) dismissal of Lisa Cook from the Fed this week is dollar-negative," said Chris Turner, head of global markets at ING

The dollar index, which measures the greenback against six major peers, edged up 0.1% to 98.225, after two days of declines. The euro was little changed, down 0.07% at $1.1630. Against the yen, the dollar weakened 0.03% to 147.34 yen.

Japan's chief trade negotiator, Ryosei Akazawa, canceled a visit to Washington at the last minute on Thursday, delaying the announcement of details of Japan's $550 billion investment pledge in the United States as part of the tariff deal.

A government spokesman said the decision was made after talks with the U.S. side revealed several points that needed further discussion "at the administrative level." The dollar slumped to its lowest level against the offshore Chinese yuan since November, last down 0.2% at 7.1360 yuan in offshore trading. (alg)

Source: Reuters