(Reuters) – The dollar rose broadly on Monday, holding near a two-year high, while the Japanese yen rose from a five-month low against the greenback as traders continued to digest the possibility of the Federal Reserve making smaller interest rate cuts. Next time. year.
The US currency has risen in recent weeks on expectations that the US central bank will be less dovish, as inflation remains above the Federal Reserve's annual target of 2%. Analysts also expect the policies of US President-elect Donald Trump's administration to boost growth and increase price pressures next year.
Federal Reserve policymakers this month lowered their 2025 interest rate forecasts to 50 basis points of cuts, from 100 basis points, and Fed Chairman Jerome Powell said further reductions in borrowing costs now hinge on further progress in lowering inflation.
The stock is on track to achieve gains of 6.6% this year. It was last up 0.1% on the day to 108.08, after hitting a two-year high of 108.54 on December 20.
The yen has suffered from a wide interest rate differential between Japan and the United States.
The dollar is heading towards achieving a return of 11.4% against the Japanese currency this year, which is its fourth annual increase. It decreased in recent trading by 0.51% to 157.02 yen.
Some analysts see the yen as likely to benefit next year from expected interest rate increases by the Bank of Japan as the Fed eases monetary policy, but with US Treasury yields continuing to rise, this has yet to be absorbed into the exchange rate. .
“With inflation remaining above target through most of 2024, price pressures may increase further if the yen falls further,” said Fouad Razaqzadeh, a market analyst. “To support its currency, the Bank of Japan may want to start raising interest rates more meaningfully.” In City Index.
Some Bank of Japan policymakers saw conditions ripe for an imminent rate hike, with one predicting a move “in the near future,” a summary of views from the bank's December meeting showed on Friday, keeping the chance of a January rate hike alive.
Traders are also anticipating any possible intervention by Japanese officials if the yen continues to weaken.
Japanese Finance Minister Katsunobu Kato on Friday reiterated concerns about the yen's decline, reiterating his warning that the government would take action against excessive movements in the currency.
The euro is headed for a 5.8% decline against the dollar this year, after the European Central Bank cut interest rates four times in 2024, and with markets expecting the ECB to take faster steps in reducing interest rates than the Federal Reserve in 2025. Down 0.25 % to $1.0401.
European Central Bank Governing Council member Robert Holzmann was quoted as saying on Saturday that the next interest rate cut by the European Central Bank could be longer after the recent rise in inflation.
The British pound fell 0.26 percent to $1.2546 and is heading towards an annual loss of 1.4 percent.
The coin fell 0.17% to $94,222, down from a record high of $108,379.28 on December 17. The cryptocurrency has risen by about 122% this year.
