Dollar stalls as market weighs Trump policies, Fed outlook; bitcoin surges

By Brigid Riley

TOKYO (Reuters) - The U.S. dollar paused its climb on Thursday as traders awaited more clarity on U.S. President-elect Donald Trump's proposed policies and sought to second-guess the prospects of less aggressive interest rate cuts from the Federal Reserve.

Meanwhile, bitcoin sped toward $100,000, continuing a blistering rally in the past few weeks on hopes the president-elect will create a friendlier regulatory environment for cryptocurrencies.

Bitcoin reached a record high of $97,902 on Thursday, underpinned by a report Trump's social media company was in talks to buy crypto trading firm Bakkt. It was last up 2.54% at $96,860.

The dollar index was down 0.11% at 106.49, but was holding onto most of the previous session's gains after investors lifted the dollar index measure against its key rivals closer to a one-year high of 107.07 hit last week.

"It's hard to short the USD right now," given that investors are also increasingly weighing the possibility that the Fed might not cut rates next month after all, said senior market analyst Matt Simpson at City Index.

That sentiment was driven by sharp swings in market pricing, which currently sets the odds of a Fed rate cut at its December meeting at just under 54%, down from 82.5% only a week ago, according to CME's FedWatch Tool.

A Reuters poll showed most economists expect the Fed to cut rates at its December meeting, with shallower cuts in 2025 than expected a month ago due to the risk of higher inflation from Trump's policies.

The dollar has rallied more than 2% since the Nov. 5 U.S. presidential election on bets Trump's policies could reignite inflation and temper the Fed's future rate cuts.

At the same time, traders are sizing up what Trump's campaign pledges of tariffs mean for the rest of the world, with Europe and China both likely in the firing line.

"Right now, we are kind of stuck in a wait-and-worry zone because Trump is in the midst of forming his cabinet," said Moh Siong Sim, currency strategist at Bank of Singapore.

"There's a lot of things that are missing there in terms of understanding," including the timing and magnitude of policies, and those details won't be known for a couple of months or so, he said.

The euro was up 0.09% at $1.0554 after slipping 0.5% on Wednesday, back toward last week's low of $1.0496, its weakest against the dollar since Oct. 2023.

Elsewhere, Ukraine fired a volley of British Storm Shadow cruise missiles into Russia on Wednesday, the latest new Western weapon it has been permitted to use on Russian targets, a day after it fired U.S. ATACMS missiles.

"The Russia-Ukraine conflict is heating up, which is further denting sentiment towards the euro alongside the prospects of trade tariffs," another "bullish cue" for the dollar index given the euro's heavy weighting, City Index's Simpson said.

Sterling traded at $1.2652, up 0.04%.

Bank of Japan Governor Kazuo Ueda said on Thursday the central bank will "seriously" take into account foreign exchange-rate moves in compiling its economic and price forecasts.

He noted that there is still a month to go until the BOJ's next policy meeting in December, adding that there will be more information to digest by then.

The dollar gave up some gains against the yen, down 0.51% at 154.63 yen after Ueda's remarks.



Market pricing is nearly evenly split on a December hike amid the yen's recent decline back toward the 38-year-lows touched in July.

The currency pair rose above the 156 mark last week for the first time since July, stirring worries that Japanese authorities may again take steps to shore up the yen.

Source: Investing.com