The US dollar headed for its biggest weekly decline in four months on Thursday, as investors increased their bets on further monetary easing amid growing pressure from President Donald Trump for the Federal Reserve to cut interest rates.
The Japanese yen rose 0.11% to 156.27 per dollar, supported by a more hawkish tone from several Bank of Japan officials.
With US markets closed for the Thanksgiving holiday, thin liquidity amplified intraday price swings.
Francesco Pesole, FX strategist at ING, said: “This may be an attractive environment for Japanese authorities to intervene in USD/JPY.”
He added that any action may still be more likely after weak US data, noting that the pair’s recent pullback may have reduced the sense of urgency.
Rate-cut expectations weigh on the dollar
The US Dollar Index edged up 0.1% to 99.65, but remains on track for its biggest weekly drop since July, down 0.54% so far this week after falling from a six-month high set last week.
Mark Haefele, chief investment officer of UBS Global Wealth Management, urged investors to reconsider their currency allocations given the dollar’s fading appeal, recommending the euro and the Australian dollar instead.
Investors also said the potential appointment of White House economic adviser Kevin Hassett — a strong advocate of lower rates — as the next Fed Chair could be a negative catalyst for the dollar.
Views on the dollar’s outlook remain divided.
Thanos Vamvakidis, global head of FX strategy at Barclays, said Europe had clearly benefited in recent months from interest-rate differentials and stronger growth expectations compared with the US.
“But some of those assumptions are now being questioned,” he added. “Higher euro funding costs are one factor, but the strength and resilience of the US economy is another.”
Euro and Swiss franc react to Ukraine peace talks
The euro slipped 0.13% to 1.1581$, after touching a one-and-a-half-week high of 1.1613$ earlier in the session.
Markets are watching diplomatic efforts around a potential peace agreement in Ukraine, which could support the single currency.
US envoy Steve Witkoff is expected to travel to Moscow next week for talks with Russian officials, though a senior Russian diplomat said Wednesday that Moscow will not offer major concessions.
Any progress toward a deal could weigh on the Swiss franc — a traditional geopolitical safe haven — though analysts note there is still little evidence of a clear “peace dividend.”
The dollar hit a one-week low against the franc at 0.8028 before recovering 0.20% to 0.8060.
Australian and New Zealand dollars climb
The New Zealand dollar jumped to a three-week high of 0.5728$, gaining nearly 2% since the Reserve Bank of New Zealand adopted a more hawkish tone yesterday.
Although the RBNZ cut rates on Wednesday, it signaled that a pause had been considered and suggested the easing cycle has ended. Strong data on Thursday further boosted expectations of future hikes, with markets pricing an increase by December 2026.
This stands in stark contrast to the more than 90 basis points of Fed cuts currently priced in for the US over the next year.
The Australian dollar also advanced after stronger-than-expected inflation data on Wednesday reinforced expectations that Australia’s easing cycle has likewise ended.
Australian 3- and 10-year bond yields — at 3.86% and 4.5% respectively — are the highest among G10 economies, making the currency appear “cheap,” according to analysts.
The Australian dollar last traded at 0.6536$, sitting near the midpoint of the range it has held for roughly 18 months.
Meanwhile, steady yuan-fixing operations by the People’s Bank of China helped keep the Chinese yuan stable at 7.08 per dollar on Thursday.
