By Kevin Buckland

TOKYO (Reuters) -The dollar hovered close to a three-week peak versus major peers on Monday amid expectations the Federal Reserve will cut interest rates this week but then signal a measured pace of easing for 2025.

soared above $105,000 for the first time, buoyed by signs President-elect Donald Trump will go ahead with a potential strategic bitcoin reserve.

The yen struggled to recover following its worst week since September after Reuters and other news outlets reported that the Bank of Japan is leaning towards forgoing a rate hike on Thursday.

Sterling was also under pressure after data on Friday showed a surprise economic contraction. The Bank of England is due to announce a policy decision just hours after the BOJ.

The dollar got additional support from climbing U.S. Treasury yields. Traders are confident of a quarter-point Fed rate reduction on Wednesday but now expect officials to forgo a cut in January, according to CME’s FedWatch tool.

With inflation running above the central bank’s 2% annual target, Fed policymakers have stated that recent upticks are part of the bumpy path to lower price pressures and not a reversal of the disinflationary trend.

But analysts say they are also likely to be wary of renewed inflation with Trump set to take office in January.

“The U.S. economy has been resilient in the face of high interest rates, which means the potential for inflation to rise if the economy overheats is a problem the Fed will need to address,” said James Kniveton, a senior FX dealer at Convera.

“There is concern that the incoming administration’s policies may be inflationary, but as the Bank of Canada Governor commented earlier this month, decisions cannot be based on potential U.S. policy, and (Fed Chair) Jerome Powell may follow suit.”

The – which tracks the currency against the euro, sterling, yen and three other top rivals – was steady at 106.80 as of 0605 GMT, after rising to 107.18 on Friday for the first time since Nov. 26.

The U.S. currency added 0.1% to 153.87 yen, and earlier touched 153.91 for the first time since Nov. 26.

Sterling rose 0.22% to $1.2636, pulling up from $1.2607 on Friday, its lowest point since Nov. 27.

The euro edged up 0.2% to $1.0518, after dipping to $1.0453 at the end of last week, its weakest since Nov. 26, not helped by news that ratings agency Moody’s (NYSE:) unexpectedly downgraded France on Friday.

Bitcoin surged as much as 3.6% from Sunday’s close to reach an all-time high of $106,533.

Trump suggested in an interview with CNBC on Friday that he plans to go ahead with a plan to build a U.S. bitcoin strategic reserve, similar to its strategic oil reserve.

On the campaign trail, Trump had promised to make the United States “the crypto capital of the planet.”

© Reuters. FILE PHOTO: U.S. Dollar banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

The CNBC interview “has been a bit of a slow burner, but it’s now resulted in that push above $105,000” for bitcoin, said Tony Sycamore, an analyst at IG.

“We’re in blue sky territory here, and the next figure the market will be looking for is $110,000.”




Source link

Best Brokers

Unmatched trading fees, generous bonuses, top notch Regulation Frame.

T&Cs Apply

Risk disclosure: All investments involve a degree of risk of some kind. Trading financial derivative products comes with a high risk of losing money rapidly due to leverage.

Top-Tier Regulations. Unmatched Spreads and Commissions. Trading View is available.

T&Cs Apply

Financial Spread Trades and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 84.7% of retail investor accounts lose money when trading CFDs with this provider.

Modern and Intuitive Interfaces, Solid Regulatory Frame, and excellent Trading Fees.

T&Cs Apply
Risk warning: Trading derivatives is highly speculative, carries an inherent risk of loss and is not suitable for all investors. Before trading, you are strongly advised to read and ensure that you understand the relevant risk disclosures and warnings.

Highly Regulated. Low Spreads and Commissions. Vast Account Options.

T&Cs Apply

Risk Warning: Trading derivatives carries significant risks. It is not suitable for all investors and if you are a professional client, you could lose substantially more than your initial investment.