Authors: Kevin Buckland and Greta Rosen Fondahn
TOKYO/GDAŃSK (Reuters) – The dollar hovered near a three-week high against major currency markets on Monday, ahead of a week of central bank meetings in which markets expect the Federal Reserve to cut interest rates but signal a measured pace of easing for 2025.
rose above $105,000 for the first time, on signs that President-elect Donald Trump will continue building a potential strategic bitcoin reserve.
The euro rose 0.13% that day to $1.0517, after falling to $1.0453 at the end of last week, the weakest since November 26, hampered by Moody’s (NYSE:) ratings agency unexpectedly downgrading France on Friday.
The decline in business activity in the euro zone has eased this month, Monday’s survey showed.
The rate – which pits the currency against six others – was steady at 106.83 as of 0900 GMT, after rising to 107.18 on Friday for the first time since November 26.
Traders are confident in Wednesday’s quarter-point Fed rate cut, but now expect officials to abandon the cut in January, according to CME’s FedWatch tool.
With inflation remaining above the central bank’s annual target of 2%, Fed policymakers said the recent gains were part of a bumpy path to easing price pressures rather than a reversal of the disinflationary trend.
But analysts say they will also likely be wary of renewed inflation when Trump takes office in January.
“The U.S. economy has demonstrated resilience to high interest rates, which means the potential for higher inflation if the economy overheats is an issue the Fed will need to address,” said James Kniveton, senior currency dealer at Convera.
“There are concerns that the new administration’s policies could be inflationary in nature, but as the governor of the Bank of Canada noted earlier this month, decisions cannot be based on potential U.S. policy, and (Fed Chair) Jerome Powell may follow suit.”
Investors actually expect this week’s Fed forecast to not take into account potential future policy changes.
“Powell … will likely emphasize that it is still too early for officials to factor any significant policy changes from the new Trump administration into their views,” he said Deutsche Bank (ETR:) analysts in a note.
The yen struggled to recover from its biggest weekly decline since September after Reuters and other news outlets reported that the Bank of Japan was leaning towards skipping an interest rate hike on Thursday.
The U.S. currency was last down 0.04% at 153.69 yen, but not before touching 153.91 for the first time since November 26.
Sterling rose 0.33% to $1.2650, having touched a November 27 low of $1.2607 on Friday.
Data showed a surprising economic slowdown in the British economy on Friday. The Bank of England is expected to announce its policy decision just hours after the BOJ meeting.
Bitcoin reaches an all-time high
Bitcoin rose as much as 3.6% from Sunday’s close to an all-time high of $106,533, but fell to $104,503 in early European trading.
Trump suggested in an interview with CNBC overdue last week that he plans to move forward with a proposal to build a U.S. strategic bitcoin reserve, similar to the strategic oil reserve.
On the campaign trail, Trump promised to make the United States the “crypto capital of the planet.”
The CNBC interview “was a little slow, but it has now resulted in bitcoin rising above $105,000,” said Tony Sycamore, an analyst at IG.
“We are in blue sky territory and the next amount the market will expect is $110,000.”
