TOKYO- The US dollar hovered at a 2-1/2-month peak on Wednesday as investors adjusted bets toward a gradual reduction of interest rates while keeping an eye on a close presidential election race.
The yen remained under pressure as the dollar and US Treasury yields marched higher, pushing it to a three-month low.
The greenback has climbed for three weeks as expectation for aggressive rate cuts from the Federal Reserve has faded after a slew of upbeat economic data.
Markets now have a 91 percent chance priced in for a moderate quarter-basis-point cut in November, the CME FedWatch tool showed. A month earlier, investors were split between bets for 50 basis points.
That less dovish outlook for the Fed has helped buoy Treasury yields. The yield on the benchmark 10-year note hit its highest since July 26 at 4.222 percent on Tuesday.
Amid an otherwise light calendar for economic data on Wednesday, the stand-out event is the release of the Fed’s Beige Book summary of economic conditions.
The last Beige Book pointed to decelerating economic growth with isolated strengths, a pattern likely to be repeated in October’s report, said senior market analyst Matt Simpson at City Index. However, an upside surprise seems more likely given recent data has outperformed forecasts, he said.
“Still, the USD index and US yields only posted marginal gains on Tuesday, which suggest bulls should tread with caution, especially if we see the two-year moves back below 4 percent.”
The dollar index which measures the US currency against six others, was last up 0.11 percent at 104.18 after ticking up to 104.19, its highest since Aug. 2. The index is up more than 3 percent so far this month.
With weeks to go before votes are tallied in the presidential election, investors have been weighing the risk of a Republican sweep – widely expected to be the most bullish election scenario for the greenback.
