The U.S. dollar was set for its weakest weekly performance since late July, as traders sharply increased expectations for further monetary easing from the Federal Reserve next month. Holiday-thinned liquidity following the U.S. Thanksgiving break added to the week’s volatility.
The U.S. Dollar Index, which tracks the greenback against six major currencies, was last up 0.1% at 99.624. This slight rebound followed five consecutive days of losses that pushed the index to its worst week since July 21.
According to CME’s FedWatch tool, Fed funds futures now reflect an 87% probability of a 25-basis-point rate cut at the December 10 meeting — a steep rise from 39% only a week earlier.
The yield on the 10-year U.S. Treasury edged up 0.8 basis point to 4.0037%, recovering after a five-day slide that briefly pushed yields below 4% twice.
Yen Fluctuates as BOJ Tightening Bets Grow
In Asian markets, the Japanese yen swung between gains and losses after weeks of weakness. The currency was last 0.1% softer at 156.385 per dollar, as solid labor market and inflation data reinforced expectations for Bank of Japan tightening.
The yen briefly strengthened after Tokyo consumer prices rose 2.8% in November, slightly above expectations and higher than the BOJ’s 2% target.
Analysts at Capital Economics noted that tight labor conditions and inflation excluding fresh food and energy remaining above 3% support the likelihood of the BOJ resuming its tightening cycle in the coming months. They said the case for firmer monetary policy “remains intact.”
The yen is still on track for a third straight monthly decline as Prime Minister Sanae Takaichi rolls out a 21.3 trillion yen ($135.4 billion) stimulus package, while the BOJ continues to hold back on rate hikes despite persistent inflation.
Euro, Pound, and Other Currencies
The euro traded at $1.1600, showing little movement in Asia. Sentiment was influenced by comments from Ukraine President Volodymyr Zelenskiy, who said Ukrainian and U.S. delegations will meet this week to advance a Geneva-based peace proposal with Russia.
The British pound slipped 0.1% to $1.323, though it remained on track for its best week since early August. The move came after U.K. finance minister Rachel Reeves announced £26 billion ($34 billion) in tax increases to fund expanded welfare spending. She later defended the plan against criticism, noting it would lift the tax burden to its highest level since World War II.
The Australian dollar rose 0.1% to $0.6536, supported by data showing private sector credit increased 0.7% in October, marking a slight acceleration from the prior month.
The offshore yuan traded at 7.074 per dollar, steady in early Asian dealings and on track for its strongest monthly performance since August.
The New Zealand dollar, or kiwi, traded at $0.5725, slipping 0.1% after completing its largest one-week rally since late April.
