The dollar rebounds from a three-day decline as investors wait for signals on Trump’s policies

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Authors: Medha Singh and Kevin Buckland

(Reuters) – The U.S. dollar strengthened on Wednesday, resuming a post-election rally after a three-day decline as investors awaited more clues on U.S. President-elect Donald Trump’s proposed policies, while the Japanese yen fell on a decline in safe-haven demand.

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Yesterday’s rise in the dollar and other classic safe-haven currencies such as the yen for geopolitical reasons proved short-lived after Russia’s foreign minister said the country would “do everything possible” to avoid the outbreak of nuclear war, several hours after Moscow’s announcement would lower the threshold for a nuclear attack.

On the Russia-Ukraine relationship, “concerns have subsided, but the market will be sensitive to any new news in this area,” said Jane Foley, head of currency strategy at Rabobank in London.

The Japanese yen fell to 155.815 against the dollar, paring gains from the previous day. The recent decline in the yen to a three-month low suggests a likely hawkish turn in the BOJ stock market as it approaches levels that required intervention in July.

Foley said 155 was the dollar-to-yen level that had markets concerned ahead of the intervention, adding that “if there is a possibility that verbal intervention will have a significant impact on stabilizing the currency pair, then it will likely deter the Ministry of Finance, at least on some time, from the actual intervention.”

Earlier this week, BOJ Governor Kazuo Ueda made only passing mention of the currency.

The index – which measures the currency against six major currencies – rose 0.5% to 106.59, recovering from a three-day decline.

The index hit a one-year high of 107.07 on Thursday last week, buoyed by expectations of big fiscal spending, higher tariffs and tighter immigration under the new U.S. administration, measures that economists say could support inflation and potentially slow Federal Reserve easing.

“With much of the Trump deal priced in, we may be in a consolidation phase until early January when Trump takes over and we have a better idea of ​​the policy details,” Foley said.

“TRUMP TRADE”

Investors are still waiting for Trump to name Treasury secretary, one of the most important government positions overseeing the country’s financial and economic policy. Some of Trump’s other picks have sparked controversy because of their relatively modest backgrounds.

“Trump Trade, which has strengthened the dollar, faces challenges related to Trump’s controversial cabinet appointments and the escalation of the Russia-Ukraine war,” wrote DBS strategists in a client note.

However, for the dollar longer term, “there needs to be more emphasis on solid economic data and the growing likelihood that the Fed will need to further snail-paced its rate cut path in 2025.” – they said.

According to CME’s FedWatch Tool, investors continue to withdraw expectations for a rate cut at the next Fed meeting in December, with bets now at 55.5%, down from 82.5% a week ago.

Sterling gained shortly before paring these gains as data showed a stronger-than-expected rise in UK consumer inflation in October, supporting the view that the Bank of England will cut interest rates only gradually over the coming months.

Traders currently see an 84% chance the BoE will keep interest rates on hold at its policy meeting next month.

The pound was last down 0.1% at $1.26695.

The euro fell 0.4% to $1.0559, well off the previous session’s low of $1.0524.

hovered near an all-time high above $94,000, which it reached overnight, amid expectations for a friendlier regulatory environment for cryptocurrencies under the Trump administration.

The report says Trump’s social media company is in talks to buy cryptocurrency trading firm Bakkt, boosting hopes for a cryptocurrency-friendly regime under his administration.

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