Dollar Holds Strong on Slower Fed Cut Bets

24 Oct 2024 , 09:49 AM

Underpinned by increased wagers on a potential second Donald Trump administration and forecasts for a slower pace of interest rate decreases by the Federal Reserve, the U.S. dollar traded near a three-month high against major rivals on Thursday.

The Fed presidents of Kansas City and Philadelphia, Jeffrey Schmid and Patrick Harker, respectively, stated this week that they would rather “avoid outsized moves” and support “a slow, methodical approach” to additional easing.

In reaction, the yield on the U.S. 10-year Treasury has increased, overnight hitting a three-month high of 4.26%.

The dollar index, which compares the currency to six competitors, including the euro and yen, was at 104.38, not far from the overnight high of 104.57, which was last recorded on July 30.

According to CME Group’s FedWatch Tool, a number of strong macroeconomic indicators and some hawkish remarks made by Fed officials have dampened expectations for monetary easing for the remainder of this year.

When U.S. bond rates rise, the Japanese yen usually declines, and on Wednesday, for the first time since July 31, the dollar rose as high as 153.19 yen. At 152.62 yen, the pair last exchanged hands.

A recent increase in market predictions for a victory by Republican nominee and former President Trump next month, which would probably result in inflationary measures like tariffs, has also helped the dollar.

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