The dollar index edged down 0.05% to 105.06 after surging to its highest since July 3 at 105.44 in the earlier session
The dollar was just below a four-month high on Thursday, while investors eyed monetary policy decisions from several central banks.
The U.S. Fed is expected to cut interest rates by 25 bps later in the day, and the market focus will be on any clues suggesting the central bank could skip a cut in December.
Last week’s October jobs report came in weaker than expected, raising questions over the degree of softness in the labour market, though this data was clouded by the impact of recent hurricanes and labour strikes.
The Fed’s decision comes on the back of the U.S. presidential election, with a victory by Trump fuelling questions over whether the bank may proceed to cut rates at a slower and shallower pace.
While the former president’s comeback to the White House received a “market-pumping” reaction, there were “mixed feelings when you dig a little deeper into the moves,” according to senior market analyst Matt Simpson at City Index.
U.S. equities at record highs and a softer yen appeared to be an “endorsement for Trump,” but a stronger dollar and higher U.S. Treasury yields suggested markets were pricing in a less dovish Fed going forward, he added.
Trump’s policies on restricting illegal immigration, enacting new tariffs, lowering taxes and deregulation may boost growth and inflation and crimp the Fed’s ability to lower rates.
Markets now see around a 70% probability the Fed will also reduce rates next month, down from 77% on Tuesday, as per the CME Group’s Fed Watch Tool.
The dollar index, which measures the greenback against six major peers, edged down 0.05% to 105.06 after surging to its highest since July 3 at 105.44 in the earlier session.
The yen was 0.09% higher at 154.5 per dollar, hitting 154.715 earlier in the session, its lowest against the U.S. currency since July 30.
China’s yuan declined to a near three-month low against the dollar on Thursday, although edged higher as the country released a slew of trade data.
The offshore yuan traded at 7.1925 yuan per dollar, up nearly 0.18%.
The euro was 0.06% higher at $1.0736, having tumbled as low as $1.068275 for the first time since July 27 on Wednesday, while sterling rose 0.28% to $1.2915.
The Aussie gained 0.7% to $0.66175, while the kiwi traded at $0.5977, up 0.64%.
