Dollar remains close to 3-month high against other major currencies

(MENAFN) On Thursday, the dollar remained close to a three-month high against other major currencies, bolstered by expectations of a gradual approach to interest rate cuts from the Federal Reserve and increasing speculation about former U.S. President Donald Trump securing a second term. The dollar index, which gauges the greenback against six significant rivals, including the euro and yen, stood at 104.30 by 0437 GMT, not far from the 104.57 level it reached overnight—the highest since July 30.

A series of robust macroeconomic indicators, along with some hawkish remarks from Federal Reserve officials, have tempered expectations regarding the extent of monetary easing for the remainder of the year, according to the CME Group's FedWatch tool. Predictions for a cumulative 50 basis point rate cut during the last two meetings of 2024 have decreased to approximately 66 percent, down from 70 percent the previous day and about 86 percent a week earlier.

Currently, traders foresee a 32 percent chance of a single 25 basis point rate cut by year-end, with only a 2 percent probability of no changes at all. Consequently, the yield on the 10-year U.S. Treasury note surged to a three-month high of 4.26 percent overnight, reflecting market reactions to these shifting expectations.

The Japanese yen typically weakens when U.S. bond yields rise, which contributed to the dollar rising against the yen, reaching 153.19 on Wednesday—the first time since July 31. Additionally, the dollar has gained from an uptick in market sentiment that Republican candidate Trump is likely to win the upcoming election next month, a scenario that could result in inflationary policies, including tariffs. The euro fell to a nearly four-month low of USD1.07612 overnight and was last seen trading at USD1.079075, while the pound held steady at USD1.29255 after dipping to a five-week low of USD1.29080 in the previous session.

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