NEW YORK: The US dollar rose on Wednesday, restarting its post-election rally after a three-session decline as investors looked for more insight on the Federal Reserve’s plans for interest rates and US President-elect Donald Trump’s proposed policies. Safe-haven currencies such as the Japanese yen, Swiss franc and the greenback saw a brief boost on Tuesday before fading.
Russia’s foreign minister Sergei Lavrov said that country would “do everything possible” to avoid nuclear war, hours after Moscow announced it would lower its threshold for a nuclear strike.
Even with the recent pause, the dollar index has rallied about 3% since the US election on growing expectations the Fed may slow its path of interest-rate cuts on concerns Trump’s policies could reignite inflation.
“There’s a lot of pessimism about Fed rate cuts that we think (is) misplaced,” said Jay Hatfield, CEO at Infrastructure Capital Advisors in New York. “The rest of the world, except for Japan, has to cut because they have zero growth, basically, and without the US they’d be in a recession.
So then the big variable is the US Everybody is super-bearish, in our opinion too bearish, about Fed cuts.”
The dollar index, which measures the greenback against a basket of currencies, rose 0.53% to 106.66, with the euro down 0.56% at $1.0536. Expectations for the path of rate cuts have been scaled back, while volatile, in recent weeks.
Markets are pricing in a 59.1% chance of a 25-basis-point cut at the Fed’s December meeting, down from 82.5% 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.
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