Dollar Strengthens on US Policy Focus

21 Nov 2024 , 10:11 AM

As traders sought to reevaluate the likelihood of less aggressive interest rate reduction from the Federal Reserve and awaited more clarification on U.S. President-elect Donald Trump’s projected policies, the U.S. dollar remained largely stable on Thursday.

Investors lifted the dollar index measure against its main competitors closer to a one-year high of 107.07 reached last week, putting the greenback back on the march higher after halting for three sessions.

Since the U.S. presidential election on November 5, the dollar has increased by more than 2% due to speculation that Trump’s policies may rekindle inflation and slow the Fed’s potential rate decreases.

Meanwhile, traders are assessing the implications of Trump’s tariff campaign promises for the rest of the world, with China and Europe most likely to be targeted.

Sharp changes in market pricing, which according to CME’s FedWatch Tool now puts the probability of a Fed rate decrease at its December meeting at just under 54%, down from 82.5% just a week ago, were the driving force behind that sentiment.

Two Fed governors, Michelle Bowman and Lisa Cook, made separate remarks on Wednesday that provided little insight into the Fed’s future course. One governor expressed confidence that pricing pressures will continue to decline, while the other cited persistent concerns about inflation.

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