By Brigid Riley
TOKYO (Reuters) – The U.S. dollar held firm on Wednesday as investors waited to see if the Federal Reserve would deliver a hawkish cut ahead of other key central bank meetings this week, pushing the Australian dollar and New Zealand to new levels.
The Fed is widely expected to deliver a 25-point interest rate cut at the end of its two-day policy meeting on Wednesday, with markets pricing in a 97% probability, according to CME's FedWatch tool.
Focus will fall on policymakers' new economic projections for 2025 to be released alongside the decision, which is how much Fed officials think they will cut rates next year. .
Data on Tuesday again showed a resilient US economy after retail sales beat expectations by jumping 0.7% in November, supported by an increase in motor vehicles and online shopping.
Investors are also weighing the potential impact of the incoming Trump administration's promised tariffs and tax cuts on the Fed's outlook.
“The USD and yields have been extended on the assumption that the Fed will cut the discount rate significantly next year, so we may see the dollar weaken if they don't revise 'only ' (interest rate forecasts) down to two cuts in 2025,” said Matt Simpson, senior market analyst at City Index.
The current dot plot projects the Fed to deliver four 25 bp rate cuts next year.
The , which measures the greenback against six rivals, was little changed at 106.9 after hitting its highest level since November 26 at 107.18 on Monday.
More positive economic news out of the US focused investors' attention on the US dollar, sending it forward and down.
The Australian dollar slipped to $0.6310, its lowest level since October 2023. It was last down 0.4% at $0.6312.
The kiwi hit a two-year low of $0.5310.
Against the yen, the dollar was down 0.07% at 153.36, having given up some of its recent gains in the previous session as US Treasury yields fell ahead of a decision the Fed. (US/)
Markets have sharply reduced promises that the Bank of Japan will raise rates on Thursday for a January hike, after several media reports suggested the central bank may be cautious.
“If the BOJ avoids a rate hike, as expected, then (BOJ Governor Kazuo) Ueda will continue to raise the telegraph rate down the line. This will help support the yen but it seems unlikely it's not far from the truth,” said Kieran Williams, head of the group. Asia FX at InTouch Capital Markets.
Japan's exports rose for the second straight month in November, data showed on Wednesday.
The Bank of England is also expected to hold rates steady on Thursday. Investors plunged further into bets on cuts next year after data on Tuesday showed Britain's wage growth picked up more than expected.
Sterling gained $1.27005, down 0.08% ahead of CPI figures for November to be released later in the day.
The euro was at $1.0502, up 0.1%.
Among other central banks meeting this week, Sweden's Riksbank is widely expected to cut rates by as much as half a point, while Norges Bank is set to leave rates unchanged.
The Swedish krona held at around 10.9486. The Norwegian krone was flat at 11.1930 against the greenback.
They were trading at 7.2905 per dollar on Tuesday, holding steady near a 13-month low against the dollar amid dour expectations for China's economic growth.
In cryptocurrencies, bitcoin was last down 2.41% to $103,853 after hitting a high of $108,379.28 in the previous session.
