The U.S. dollar fell to a one-week low against major currencies on Wednesday, extending a three-day decline from its recent peak. The market appears to be recalibrating after a sharp post-election rally fueled by expectations of aggressive fiscal and trade policies under President-elect Donald Trump.
The dollar index, which tracks the greenback against six key peers, slid to 106.07, its lowest since last Wednesday, before stabilizing at 106.18 by 0247 GMT. This comes after touching a one-year high of 107.07 last week on hopes of inflationary policies such as higher tariffs and expanded fiscal spending under the incoming administration.
A brief rally in the dollar and other safe-haven currencies like the yen was cut short after Russia’s foreign minister reassured that Moscow would work to prevent nuclear conflict, despite announcing a lower threshold for nuclear strikes earlier in the day.
“The ‘Trump Trade’ driving the greenback higher is facing headwinds from both Trump’s contentious cabinet picks and escalating tensions in the Russia-Ukraine conflict,” analysts at DBS noted in a client briefing.
The yen weakened against the dollar, which rose 0.9% to 154.84 yen after plunging to 153.28 in the previous session. The euro remained steady at $1.0598, recovering from a low of $1.0524 the day prior.
Traders are adjusting their expectations for a Federal Reserve rate cut at the December meeting, with odds slipping to 57.3% from 58.7% a day earlier and 76.8% a month ago, according to CME’s FedWatch Tool.
Fed Chair Jerome Powell recently emphasized the resilience of the U.S. economy, stating, “The economy is not sending signals that we need to rush into rate cuts.” Robust economic indicators have further dampened speculation of aggressive monetary easing in 2025.
Bitcoin surged to a record $94,078.22 before settling around $91,954. Market optimism is fueled by expectations of a regulatory environment favorable to cryptocurrencies under Trump, who has been dubbed a “crypto cheerleader.”
The Financial Times reported that Trump’s social media company is in discussions to acquire crypto trading firm Bakkt, further signaling a potential embrace of digital assets during his administration.
Trump’s high-profile cabinet appointments continue to attract scrutiny, particularly his selection of Cantor Fitzgerald CEO Howard Lutnick as Commerce Secretary. Critics have raised concerns about some nominees’ lack of relevant experience.
Looking ahead, analysts suggest that the dollar’s trajectory will hinge on economic data and Federal Reserve policy rather than short-term geopolitical developments. “The longer-term outlook for the dollar will depend on solid economic performance and indications that the Fed could further delay its rate-cutting path,” DBS strategists said.
The markets remain watchful as Trump finalizes his Treasury Secretary pick and global tensions, particularly in Ukraine, continue to evolve.
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