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TOKYO: The US dollar stood broadly firm on Thursday as traders awaited more clarity on US President-elect Donald Trump’s proposed policies and sought to second-guess the prospects of less aggressive interest rate cuts from the Federal Reserve.

After stalling for three sessions, the greenback was back on the march higher, with investors lifting the dollar index measure against its key rivals closer to a one-year high of 107.07 hit last week.

The dollar has rallied more than 2% since the Nov. 5 US presidential election on bets Trump’s policies could reignite inflation and temper the Fed’s future rate cuts.

At the same time, traders are sizing up what Trump’s campaign pledges of tariffs mean for the rest of the world, with Europe and China both likely on the firing line.

“It’s hard to short the USD right now,” given that investors are also increasingly weighing the possibility that the Fed might not cut rates next month after all, said senior market analyst Matt Simpson at City Index.

That sentiment was driven by sharp swings in market pricing, which currently sets the odds of a Fed rate cut at its December meeting at just under 54%, down from 82.5% just a week ago, according to CME’s FedWatch Tool.

A Reuters poll showed most economists expect the Fed to cut rates at its December meeting, with shallower cuts in 2025 than expected a month ago due to the risk of higher inflation from Trump’s policies.

Separate comments from two Fed governors Michelle Bowman and Lisa Cook on Wednesday gave little clarity about the Fed’s path forward, with one citing ongoing concerns about inflation and another expressing confidence that price pressures will continue to ease.

Dollar sags to one-week low after safety bid, ‘Trump trade’ momentum wanes

The dollar index held steady at 106.56, up from a one-week nadir hit in the previous session.

The euro was nearly flat at $1.054725 after slipping 0.5% on Wednesday, back toward last week’s low of $1.0496, its weakest against the dollar since Oct. 2023.

“The Russia-Ukraine conflict is heating up, which is further denting sentiment towards the euro alongside the prospects of trade tariffs,” another “bullish cue” for the dollar index given the euro’s heavy weighting, City Index’s Simpson said.

Ukraine fired a volley of British Storm Shadow cruise missiles into Russia on Wednesday, the latest new Western weapon it has been permitted to use on Russian targets a day after it fired US ATACMS missiles.

The dollar gave up some gains against the yen, down 0.33% at 154.91 yen, although the Japanese currency remained under pressure.

The currency pair rose above the 156 mark last week for the first time since July, stirring worries that Japanese authorities may again take steps to shore up the yen.

The focus will be on Bank of Japan Governor Kazuo Ueda, who is scheduled to speak at a financial forum in Paris on Thursday after leaving the door open for a December rate hike in balanced remarks at the start of the week.

Investors will be looking for any stronger indication that a year-end rate hike is in the cards, with market pricing nearly evenly split amid the yen’s recent decline back toward the 38-year-lows touched in July.

Sterling was up 0.07% at $1.2656. Data on Wednesday showed British inflation jumped more than expected last month to rise back above the Bank of England’s 2% target, supporting the central bank’s cautious approach on interest rate cuts.

Elsewhere, bitcoin reached a record high of $95,016 on Wednesday, underpinned by a report Trump’s social media company was in talks to buy crypto trading firm Bakkt.

Bitcoin has been swept up in a blistering rally in the past few weeks on hopes the president-elect will create a friendlier regulatory environment for cryptocurrencies.