Chuck Mikołajczak
NEW YORK (Reuters) – The U.S. dollar strengthened for a third straight session on Thursday as Treasury yields fell, but remained elevated on concerns about tariffs under the novel Trump administration, while recent weakness in sterling continued.
U.S. Treasury yields are trending higher, with the benchmark 10-year bond hitting an 8-1/2-month high of 4.73% on Wednesday, as a resilient economy and likely tariffs reignited inflation concerns and fueled expectations that the Federal Reserve will take a slower approach path of interest rate cuts.
The latest economic data showed the labor market was on solid footing, and minutes from the Fed’s December meeting showed policymakers expressed novel concerns about inflation, suggesting the novel administration’s plans could tardy economic growth and enhance unemployment.
Investors will pay attention to Friday’s key government payroll report to gauge how aggressively the central bank will cut interest rates.
“Most of the economic readings coming in have been slightly better than expected, so if we get non-farm payrolls data tomorrow that is stronger than expected, that will be another indicator that the economy is not cooling and that there will be more pressure on inflation,” said Joseph Trevisani, senior analyst at FX Street in New York.
“We will also get a Trump administration that will change many things,” Trevisani added.
The gauge measuring the dollar against a basket of currencies rose 0.15% to 109.18, while the euro fell 0.2% to $1.0297.
Boston Federal Reserve President Susan Collins said Thursday that significant uncertainty about the outlook requires the central bank to cautiously pursue further interest rate cuts, while Philadelphia Federal Reserve President Patrick Harker said he still expects rate cuts, but any an inevitable reduction is not needed in the face of significant uncertainty about the economic prospects.
The pound sterling weakened 0.53% to $1.2296, marking a third straight session of declines after hitting its lowest level since November 13, 2023, under pressure from the British finance minister over concerns about Trump’s policies that have pushed up financing costs external British government.
The Japanese yen strengthened 0.27% to 157.93 per dollar. Government data on Thursday showed Japan’s inflation-adjusted real wages fell for a fourth straight month in November, pushed by higher prices, even as basic wages rose at the fastest pace in more than three decades.
Goldman Sachs analysts believe that discussions at the January meeting of branch managers confirm their view on the January interest rate enhance by the Bank of Japan.
The US stock exchange was closed on Thursday. US bond markets were expected to close prematurely ahead of the funeral of former President Jimmy Carter (NYSE:).
