TOKYO- The US dollar stood broadly firm on Thursday as traders awaited more clarity on US 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 percent since the Nov. 5 US 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.
“It’s hard to short the USD right now,” given that investors are also increasingly weighing the possibility that the Fed might not cut rates next month after all, said senior market analyst Matt Simpson at City Index.
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 percent, down from 82.5 percent 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. Separate comments from two Fed governors Michelle Bowman and Lisa Cook on Wednesday gave little clarity about the Fed’s path forward, with one citing ongoing concerns about inflation and another expressing confidence that price pressures will continue to ease.
