The U.S. dollar index eased marginally to 103.29 in the Asian afternoon, after reaching 103.69 on Wednesday for the first time since December 13

The dollar hovered near a one-month high versus major rivals on Thursday after strong U.S. retail sales data added to building expectations the Fed will not rush to lower interest rates.

The U.S. dollar index eased marginally to 103.29 in the Asian afternoon, after reaching 103.69 on Wednesday for the first time since December 13.

Traders have cut the odds of a first Fed rate cut by March to 61%, from 65.1% on Tuesday, as per CME’s FedWatch Tool.

The market is still pricing in a likely 150 bps of cuts by the end of the year, even as Fed officials including Governor Christopher Waller this week pushed back against expectations of quick policy loosening.

Pricing in the US rates market now looks much more reasonable, said Tony Sycamore, an analyst at IG. The bounce back in the USD in 2024 has come far enough for now.

The dollar pushed as high as 148.525 yen overnight for the first time since the end of November.

It was last trading 0.08% lower on the day at 148.04 yen. At the end of last week, though, it was as weak as 144.35 yen.

Investors have been steadily pricing out hawkish BoJ wagers, not least due to the devastating New Year’s Day quake in central Japan. The Bank of Japan meets on policy on Monday and Tuesday of next week.

I think dollar-yen is going to be floating between 145 and even 150 in the near term, a level last seen in mid-November, said Shoki Omori, chief Japan desk strategist at Mizuho Securities.

Should the Bank of Japan stick to its dovish message next week, and if Fed Chair Jerome Powell strikes a similar posture to Waller at the U.S. central bank’s policy meeting on January 30-31, the dollar could push beyond 150 yen by the start of February, Omori added.

“Japanese officials could start to come in and verbally intervene at any time now” to try and slow the yen’s decline, he said.