The dollar has jumped for three weeks to reach its highest since August 2 at 104.19 as expectations for aggressive interest rate cuts from the Fed have faded after a slew of upbeat economic data
The U.S. dollar rose to a 2-1/2-month peak on Wednesday as investors adjusted bets toward a gradual cut of interest rates while keeping an eye on a close presidential election race.
The yen was the biggest mover, slipping to 152 per dollar for the first time since July 31 as U.S. Treasury yields and the dollar continued to rise.
The dollar has jumped for three weeks to reach its highest since August 2 at 104.19 as expectations for aggressive interest rate cuts from the Fed have faded after a slew of upbeat economic data.
Markets now have a 91% probability priced in for a moderate quarter-basis-point cut in November, according to the CME FedWatch tool. A month earlier, investors were split between bets for 50 bps and 25 bps.
The outlook has boosted Treasury yields, with the yield on the benchmark 10-year note reaching its highest since July 26 at 4.222% on Tuesday.
The possibility of Republican former President Donald Trump winning the U.S. presidential election next month has further buoyed the dollar and pressured the yen.
Against the yen, the dollar last traded at 152.08 yen, up 0.65%.
With less than two weeks to go before votes are tallied in the presidential election, investors have been weighing the possibility of a Republican sweep – widely expected to be the most bullish election scenario for the greenback.
While market expectations seem to be leaning toward a Trump win, there’s still “plenty of time” to reprice, according to senior market analyst Matt Simpson at City Index.
We might even see a bit of a pullback on the dollar and yields if markets price in a Harris win, given her policies are deemed less inflationary, he said.
