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HomeLatestDollar Steady as Fed Rate Speculation Continues; Ether Spurs Crypto Rally
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Dollar Steady as Fed Rate Speculation Continues; Ether Spurs Crypto Rally

The U.S. dollar held firm on Tuesday, while the yen struggled on the weaker side of the 156 level. Trading was mostly rangebound as investors remained focused on the expected timing and extent of Federal Reserve rate cuts this year.

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Cryptocurrencies experienced a significant rally, led by a surge in ether due to growing anticipation of the U.S. Securities and Exchange Commission (SEC) potentially approving spot ether exchange-traded funds (ETFs).

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Against the yen, the dollar rose 0.11% to 156.41 in Asia. The yen has remained in a tight range recently as fears of further intervention by Japanese authorities deterred traders from pushing the currency to new lows. However, the substantial interest rate differentials between the U.S. and Japan continued to make the yen appealing as a funding currency.

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Elsewhere, the euro edged 0.02% higher to $1.0859, while sterling gained 0.04% to $1.27115.

With minimal U.S. economic data on the calendar this week to guide currency movements, investors are focusing on comments from Federal Reserve officials for clues about the U.S. rate outlook and the potential timing of an easing cycle. Several officials on Monday called for continued caution in policy, despite data last week showing a welcome easing in consumer price pressures in April.

“I think all the comments from various officials will deliver more of the same messages, and the main message will be for the FOMC to continue a patient approach on interest rate cuts,” said Carol Kong, a currency strategist at the Commonwealth Bank of Australia.

Despite the cautious rhetoric from the Fed, market pricing for rate cuts has not significantly altered, with investors betting on two cuts this year, beginning in September. Against a basket of currencies, the dollar steadied at 104.62.

The New Zealand dollar fell 0.09% to $0.61005, while the Australian dollar slipped 0.14% to $0.6658. Minutes from the Reserve Bank of Australia’s May meeting, released on Tuesday, showed the central bank decided to hold interest rates steady to avoid “excessively fine-tuning” policy, though a hike might be necessary if inflation forecasts prove too optimistic.

In the cryptocurrency market, ether jumped more than 5% to over a one-month high of $3,720.80, following a nearly 14% surge in the previous session—its largest daily percentage gain since November 2022. Bitcoin broke above the $70,000 level and was last trading 2% higher at $70,980.

Analysts attributed the latest crypto rally to speculation that an approval of spot ether ETFs by the U.S. SEC could be imminent, following the earlier listing of bitcoin ETFs this year.

“It’s absolutely flown,” said Tony Sycamore, a market analyst at IG. “I think it’s partly due to that speculation, but also due to core U.S. inflation data last week that boosted risk sentiment and brought rate cuts back into play.

“With the SEC approval in January and then the halving out of the way, it was lacking a little bit of a catalyst in terms of what would be the next key driver for crypto, and I think it was always going to revert back to macro. And the macro has been really, really good since last Wednesday.

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