The U.S. dollar index was flat at 103.48 after rising to the highest since December 13 at 103.82 in the earlier session

The dollar hovered near a six-week high against major peers on Wednesday as investors cemented expectations that the Fed would be in no rush to cut interest rates in the face of a strong U.S. economy.

The Japanese yen, though, gained as expectations rose for a stimulus exit as soon as March, after hawkish comments from the Bank of Japan on Tuesday.

The U.S. dollar index was flat at 103.48 after rising to the highest since December 13 at 103.82 in the earlier session.

The U.S. rate futures market on Tuesday priced in a roughly 47% probability of a March rate cut, up from late on Monday, but down from 80% around two weeks ago, as per LSEG’s rate probability app.

For 2024, futures traders are betting on five quarter-point rate cuts. Two weeks ago they anticipated six.

“Markets have been correcting from the narrative that rate cuts were incoming and incoming quickly,” leading to dollar strength, said James Kniveton, senior corporate FX dealer at Convera.

This follows a general pattern of resistance to inflation reduction the closer central banks get to their final target, and has caused a rethinking of how fast monetary policy would return to lower levels, he added. We have seen ECB officials push back on rate cut expectations as well, in line with the Fed.

The ECB decides policy on Thursday. No change in interest rates is expected, but investors will watch central bank chief Christine Lagarde’s press conference for clues on where rates are headed.

The euro was flat at $1.08565, after sliding as low as $1.0822 on Tuesday for the first time since December 13.

Sterling was mildly higher at $1.2694, making up some ground following an overnight dip of 0.2%. The Bank of England announces its policy decision on February 1.

The Japanese yen gained some ground on Wednesday, after a volatile session a day earlier, after the Bank of Japan opted to keep stimulus settings unchanged, as expected, but central bank head Kazuo Ueda hinted at a possible end to negative rates in April or even March.

The dollar dropped 0.17% to 148.085 yen, after swinging from as low as 146.99 and as high as 148.70 on Tuesday.

China’s yuan was steady in offshore trading at 7.1660 per dollar, keeping close to a nearly two week high of 7.1635 from Tuesday, when Bloomberg reported that Chinese policymakers are seeking to mobilise nearly 2 trillion yuan ($278.86 billion) as part of a stabilisation fund to support the ailing stock market.