The US dollar steadied on Tuesday as traders awaited a widely expected interest-rate cut from the Federal Reserve, while the Australian dollar strengthened after the Reserve Bank of Australia signaled no further near-term easing.
Investors are positioning ahead of the Fed decision, with several other major central banks also set to announce policy moves before the end of the week.
Michael Pfister, FX strategist at Commerzbank, said, “The Fed meeting is tomorrow, so we’re unlikely to see major repositioning before then.”
The dollar index, which measures the US currency against six major peers, slipped 0.1% to 98.977.
Traders also look ahead to the NFIB Small Business Index for November and October’s JOLTS job openings data due later in the session.
Bond investors have scaled back expectations for the pace of rate cuts in 2026, as doubts grow over whether Kevin Hassett — widely viewed as the frontrunner to succeed Jerome Powell when his term ends in May — will be as dovish as President Donald Trump hopes.
Even so, markets see this week’s Fed cut as virtually assured, shifting the focus toward next year’s outlook.
Pfister noted that once the policy statement is released, attention will center on the Dot Plot, pointing to widening disagreement among Fed officials. He added that lower rate-path projections compared with the previous meeting may not offer much support for the dollar.
According to CME’s FedWatch tool, futures imply an 89.4% probability of a 25-basis-point cut at the December 9–10 meeting.
The US 10-year Treasury yield dipped one basis point to 4.1605% after three consecutive sessions of gains to near three-month highs.
Analysts at ING wrote, “Markets have quickly repriced toward higher rates, and the new levels appear justified by fundamentals.”
Euro edges higher… Australian dollar extends gains
The euro rose after Monday’s selloff in German bonds, following comments from ECB Executive Board member Isabel Schnabel, who told Bloomberg the bank’s next move could be a rate hike rather than a cut — though not in the near term. The single currency was up 0.1% at $1.1653.
The Australian dollar maintained its upward tone, rising 0.3% to $0.6645 after the RBA held rates at 3.6% for a third straight meeting and warned that inflation pressures could persist.
Sim Moh Siong, FX strategist at Bank of Singapore, said, “The RBA did not attempt to push back against the market’s hawkish expectations… what was said aligns with the view that the bank is leaning more toward tightening.”
Gains accelerated after Governor Michele Bullock confirmed in a press conference that rate cuts are no longer on the table.
Pfister of Commerzbank added, “The press conference made it clear that cuts are finished — and that the next move could be a hike. That was enough to lift the Aussie.”
Quake pressures yen… yuan and pound rise
The Japanese yen slipped 0.1% to 155.82 per dollar after an initial uptick in early Asian trading, which followed a powerful 7.5-magnitude earthquake in northeastern Japan that triggered evacuation orders and a tsunami warning later downgraded.
Tony Sycamore, market analyst at IG in Sydney, said the initial shock revived concerns about supply-chain fragility, insurance losses, and potential disruptions to industrial output — adding to caution ahead of central bank decisions.
The offshore Chinese yuan rose 0.1% to 7.0623 per dollar as investors interpreted Monday’s Politburo meeting statement as signaling no urgency for additional stimulus.
Sterling climbed 0.2% to $1.33470, while the New Zealand dollar rose 0.3% to $0.57920.
