Dollar Set for Weekly Gain Amidst Fed Rate Cut Bets

13 Dec 2024 , 09:29 AM

Amid speculation that the Federal Reserve might lower interest rates next week but then proceed cautiously with additional reductions, the dollar surged to a 2 1/2-week high against key peers on Friday, setting it up for its best week in a month.

Following rate cuts at the Swiss franc and euro a day earlier, the U.S. currency also gained strength against the yen as there were rumours that the Bank of Japan might forego raising interest rates at its meeting next week.

For the first time since November 26, the dollar index, which compares the value of the currency to that of the euro, yen, and three other competitors, increased somewhat to 107.05.

A rise in jobless claims indicated that the job market was gradually cooling in accordance with forecasts, while some softening in U.S. producer price data reported overnight, despite a hot headline figure, maintained market conviction for a Fed cut on Dec. 18.

According to CME’s FedWatch tool, traders set 21% odds on another easing in January, but they view an easing at the next meeting as inevitable.

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