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HomeCurrenciesU.S. Dollar Strengthens as Rate Cut Expectations Ease, Yen Supported by Jawboning

U.S. Dollar Strengthens as Rate Cut Expectations Ease, Yen Supported by Jawboning

The U.S. dollar remained close to a 4-1/2-month high against major currencies on Tuesday as traders adjusted their expectations for the timing of the Federal Reserve’s first interest rate cut this year.


Following unexpected U.S. manufacturing expansion data from Monday, the dollar extended its gains against the euro, nearing a six-week high, and against the pound sterling.


However, concerns about potential intervention by Japanese authorities slowed the dollar’s rise against the yen, despite long-term U.S. Treasury yields climbing to a two-week peak.


Gold, which typically performs well when yields decline, stabilized after retreating from a record high on Monday.

According to the CME’s FedWatch tool, the U.S. rate futures market now suggests a 61.3% likelihood of a Fed rate cut in June, down from about 70.1% probability a week earlier.

Richard Franulovich, head of currency strategy at Westpac, noted the divergence between solid U.S. growth dynamics and reduced Fed rate cut risk compared to sluggish growth in other major currencies. He suggested viewing any dips in the dollar index as buying opportunities, with targets around the 106 region.

The dollar index, which measures the currency against a basket of peers, edged slightly higher to 105.05, nearing the high of 105.07 reached on Monday.

The euro slipped to $1.07335, while sterling weakened to $1.25455. The Japanese yen firmed slightly to 151.75 per dollar, after reaching a weak level of 151.79 earlier in the session.

Despite the Bank of Japan’s recent interest rate hike, concerns about further tightening amid a fragile exit from deflation have kept Japanese officials cautious. Finance Minister Shunichi Suzuki reiterated Japan’s willingness to respond to disorderly currency moves, signaling potential intervention.

China’s yuan fell to a 4-1/2-month low against the dollar, while the Australian dollar remained flat and the New Zealand dollar eased slightly.

Spot gold edged up to $2,255.27 after retreating from a record high in the previous session.

In the cryptocurrency market, bitcoin experienced a 4.4% decline to $69,707 following a sudden drop of more than $3,000 within 15 minutes, coinciding with the start of trading in China’s mainland blue chips.