The exception was the yen, against which the dollar held firm after the Bank of Japan was silent on an end to its ultra-loose monetary policy the previous day
The U.S. dollar dipped against most major currencies on Wednesday as traders continued to sell the currency on bets that the U.S. Fed will soon begin cutting interest rates, ahead of inflation data later this week.
The exception was the yen, against which the dollar held firm after the Bank of Japan was silent on an end to its ultra-loose monetary policy the previous day.
Fed officials have been pushing back after last week’s FOMC meeting saw three rate cuts pencilled in for next year, sparking a rally in financial markets.
Market participants are currently pricing in a 67.5 per cent chance of the first rate cut happening at the Fed’s March meeting, shows the CME FedWatch tool.
The proverbial genie is out of the bottle now, and the Federal Reserve either has to accept that and risk easing policy prematurely or push back very hard and cause a bit of volatility in the markets, said Kyle Rodda, senior financial market analyst at Capital.com.
While Atlanta Federal Reserve President Raphael Bostic on Tuesday repeated on Tuesday that he expects two rate cuts likely in H2 of the year, he added that there is no “urgency” now.
On the same day, Richmond Fed President Thomas Barkin said whether the central bank can deliver on forecasts of rate cuts depends on the performance of the economy.
The dollar index was mostly flat at 102.20 after dropping more than 0.3 per cent on Tuesday and touching a four-month low of 101.76 last week.
In the end, the dollar’s movement will depend on economic data supporting the rate cuts that have been priced in, Rodda added.
Meanwhile, the dollar had the yen pinned lower at 143.78 yen, after the Japanese currency dropped to 144.95 the previous day.
The euro held firm at $1.0973, while sterling was trading at $1.2724 after making gains on a softer dollar on Tuesday.
