The U.S. dollar moved toward its sharpest weekly decline in four months on Thursday. Investors continued to price in further monetary easing, while President Donald Trump increased pressure on the Federal Reserve to cut interest rates.
The Japanese yen gained 0.10% to reach 156.33 per dollar. This move was supported by a more hawkish tone from Bank of Japan officials.
U.S. markets were closed for Thanksgiving, which kept liquidity thin and intensified price swings.
Forex strategist Francesco Pesole from ING said the current market conditions could encourage Japanese authorities to step in to support the yen. However, he added that policymakers may prefer to act after data that is clearly negative for the dollar. The recent pause in the dollar/yen pair may also have reduced the urgency for intervention.
Rate Expectations Put Pressure on the Dollar
The U.S. dollar index inched 0.05% higher to 99.58. Even so, it has pulled back from a six-month high reached last week and is on track for its largest weekly drop since July. The index is down 0.60% for the week.
Mark Haefele, chief investment officer at UBS Global Wealth Management, advised investors to review their currency positions. He said the U.S. dollar is losing its appeal and recommended shifting toward the euro and the Australian dollar.
Some analysts noted that if Kevin Hassett, a strong supporter of rate cuts, becomes the next Federal Reserve chair, it could further weaken the dollar’s outlook.
Still, not everyone agrees on the long-term direction of the currency.
Themos Fiotakis, global head of forex strategy at Barclays, said Europe had previously benefited from stronger growth expectations and widening rate differentials. He noted that these assumptions are now being challenged. The euro’s high valuation and the continued resilience of the U.S. economy both play a role.
Euro and Swiss Franc React to Ukraine Peace Talks
The euro slipped 0.05% to $1.1596 after touching a one-and-a-half-week high of $1.1613 earlier in the day.
Markets continue to watch developments around potential Ukraine peace negotiations. A breakthrough could support the euro.
Russian President Vladimir Putin said that the draft peace plan discussed by the United States and Ukraine could be the basis for future agreements. If talks fail, Russia will continue its military actions.
Analysts noted that a successful agreement could weaken the Swiss franc, which typically strengthens during geopolitical tension. For now, however, there is little evidence of a “peace dividend,” as uncertainty remains elevated.
The dollar touched a one-week low against the Swiss franc at 0.8028 before recovering slightly to 0.8056, up 0.16%.
Aussie and Kiwi Currencies Strengthen
The New Zealand dollar surged to a three-week high of $0.5728 and has gained nearly 2% since the Reserve Bank of New Zealand struck a more hawkish tone. The central bank cut rates on Wednesday but said a hold was also considered, signaling that the easing cycle may be finished. Strong economic data on Thursday pushed expectations of future rate hikes, with markets now pricing an increase by December 2026.
This outlook contrasts sharply with the U.S. Federal Reserve, where markets see more than 90 basis points of cuts between now and the end of next year.
The Australian dollar also moved higher after inflation data on Wednesday came in hotter than expected. The reading suggested that Australia has likely ended its own easing cycle.
Australia currently has the highest interest rates in the G10. Analysts said this makes the Australian dollar look relatively cheap. At $0.6536, the Aussie is trading in the middle of the channel it has held for roughly 18 months.
