The US dollar remained near a one-week low during Wednesday’s trading as markets awaited further economic data and continued to speculate about Federal Reserve policy.
Growing expectations of an interest-rate cut by the Federal Reserve in December helped support global equities.
The dollar index stayed close to its lowest level in a week, while China’s offshore yuan touched a 13-month high after the Chinese central bank guided the currency toward stronger levels alongside broad US-dollar weakness.
With markets becoming more certain about a Fed rate cut next month, traders believe the path for long-term forward premiums will depend more heavily on the Reserve Bank of India’s policy decision scheduled for December 5.
Data released Tuesday showed that US retail sales rose less than expected in September, while producer prices came in line with expectations.
US consumer confidence declined in November as households grew increasingly worried about jobs and their financial conditions.
This prompted traders to increase their bets on a Fed rate cut next month, with markets now pricing an 84% probability of a 25-basis-point reduction, according to the CME FedWatch tool — keeping pressure on the US dollar.
Carol Kong, currency strategist at Commonwealth Bank of Australia, said: “The overnight data certainly paints a picture of a slowing US economy, adding to the justification for a near-term rate cut by the FOMC.”
Against a weaker dollar, the euro moved close to the 1.16 level and was last traded at 1.1567, supported by slight indications of progress on a peace plan between Russia and Ukraine.
Ukrainian President Volodymyr Zelensky said Tuesday that his country is ready to move forward with the US-supported framework to end the war with Russia and that he would discuss the remaining points of contention with US President Donald Trump, in talks that should include European allies.
The British pound was little changed, stabilizing at 1.3166 ahead of the highly sensitive budget announcement to be presented today by UK Finance Minister Rachel Reeves, who is expected to reveal tens of billions of pounds in tax increases.
Traders rushed into the options market for protection against potentially sharp swings in the pound ahead of the budget outcome.
Thierry Wizman, global FX and rates strategist at Macquarie, said in a note: “Speculative activity and hedging against sterling have risen in the weeks leading up to the UK’s Autumn Budget statement.” He added that the currency may see a temporary boost if the proposed budget is viewed as “fiscally disciplined.”
The US dollar fell 0.03% against a basket of major currencies to 99.82, after losing 0.3% in the previous session — its biggest daily decline in about three weeks.
The greenback also came under pressure following a Bloomberg report stating that White House economic adviser Kevin Hassett has emerged as a leading contender for the Federal Reserve chairmanship.
Like Trump, Hassett has argued that interest rates should be lower than they are under Jerome Powell’s leadership. US Treasury Secretary Scott Bessent said Tuesday that there is a good chance Trump will announce his choice before Christmas.
Rodrigo Catril, senior currency strategist at National Australia Bank, said: “Hassett is viewed as being closely aligned with President Trump’s preference for lower interest rates, and his appointment would likely strengthen the administration’s push for a more accommodative monetary policy.”
Meanwhile, a weaker dollar provided some relief to the yen, which slipped 0.1% on Wednesday to 156.24 per dollar, but remained far from last week’s ten-month low of 157.90.
Traders remain alert to the possibility of intervention from Tokyo to halt the currency’s decline, with Thursday’s US Thanksgiving holiday offering a potential window for authorities to act.
Kong of Commonwealth Bank of Australia said: “Thanksgiving will mean thinner liquidity, and that could be a convenient time for Japanese authorities to intervene, as the impact on markets would be larger.” She added: “I do think direct intervention is definitely a risk this week, based on the recent comments from Japanese officials.”
