The U.S. dollar slipped on Thursday after soft economic data increased expectations that the Federal Reserve will cut interest rates next week. This provided some relief for the Japanese yen and pushed the euro to its highest level in nearly seven weeks.
Investors are also assessing the possibility that White House economic adviser Kevin Hassett could become the next Federal Reserve Chair once Jerome Powell’s term ends in May. Hassett is expected to push for further rate cuts.
U.S. President Donald Trump said this week that he will announce his pick to replace Powell early next year, extending a selection process that has dragged on for months, despite his earlier claim that he had already decided on a nominee.
Analysts believe that appointing Hassett could weigh on the dollar. According to the Financial Times, bond investors have expressed concerns to the Treasury Department that Hassett might push for aggressive rate cuts in line with Trump’s demands.
According to the CME FedWatch tool, traders now see an 89% probability of a quarter-point rate cut next week, with expectations of a total of 89 basis points of cuts by the end of next year. Analysts, however, remain skeptical about the duration and strength of the easing cycle.
The dollar index, which measures the U.S. currency against six major peers, stood at 98.919, hovering near its lowest level in five weeks. The index is down nearly 9% for the year.
The euro held steady at $1.1674 during Asian trading hours after hitting its highest level since October 17 in the previous session, supported by data showing that eurozone business activity expanded in November at the fastest pace in 30 months.
The single European currency is up more than 12% this year and is on track for its strongest annual gain since 2017, benefiting from dollar weakness triggered by tariff concerns earlier in the year and rising expectations of U.S. rate cuts.
The yen was little changed at 155.18 per dollar amid a slight easing in expectations of intervention by Tokyo authorities to support the currency.
Markets now expect the Bank of Japan to raise interest rates within two weeks, following hints from BOJ Governor Kazuo Ueda that helped ease pressure on the yen.
The British pound reached $1.33425, hovering near its highest level since October 28. The Australian dollar last traded at $0.66075, while the New Zealand dollar stood at $0.5774 — both near their highest levels in over a month.
Reuters
