By Kevin Buckland
TOKYO (Reuters) – The dollar fell near a three-week high against major peers on Monday amid expectations that the Federal Reserve will cut interest rates this week but then signal a measured pace of easing for 2025.
has soared above $105,000 for the first time, boosted by signs that President-elect Donald Trump will go ahead with a strategic reserve of bitcoins.
The yen struggled to recover from its worst week since September after Reuters and other news outlets reported that the Bank of Japan is continuing to forgo a rate hike on Thursday.
Sterling was also under pressure after Friday's data showed a surprising economic slowdown. The Bank of England is expected to announce a policy decision just hours after the BOJ.
The dollar received additional support from climbing US Treasury yields. Traders are optimistic about Wednesday's quarter-point Fed rate cut but now expect officials to forego a cut in January, according to CME's FedWatch tool.
With inflation running above the central bank's 2% annual target, Fed policymakers have said recent hikes are part of the bumpy road to lower price pressures and not a reversal of the deflationary movement.
But analysts say they are likely to be wary of renewed inflation with Trump taking office in January.
“The US economy has been resilient in the face of high interest rates, which means the potential for inflation to rise if the economy overheats is a problem the Fed must address,” said James Kniveton, senior FX trader at Convera.
“There is concern that the policies of the incoming administration may be inflationary, but as the Governor of the Bank of Canada said earlier this month, decisions cannot be based on policy The US may have, and (Fed Chairman) Jerome Powell may follow suit.”
The – which tracks the currency against the euro, sterling, yen and three other major rivals – was steady at 106.80 as of 0605 GMT, after rising to 107.18 on Friday for the first time since November 26 .
The US currency added 0.1% to 153.87 yen, and earlier touched 153.91 for the first time since November 26.
Sterling rose 0.22% to $1.2636, pulling up from $1.2607 on Friday, its lowest point since November 27.
The euro rose 0.2% to $1.0518, after falling to $1.0453 late last week, its weakest since Nov. 26, not helped by news that ratings agency Moody's (NYSE: ) downgraded France on Friday unexpectedly
Bitcoin rose as much as 3.6% from Sunday's close to reach a record high of $106,533.
Trump suggested in an interview with CNBC on Friday that he plans to go ahead with a plan to build a US strategic bitcoin reserve, similar to his strategic oil reserve.
On the campaign trail, Trump had promised to make the United States “the crypto capital of the planet.”
The CNBC interview “has been a bit of a slow burn, but it is now the result of that increase above $105,000” for bitcoin, said Tony Sycamore, an analyst at IG.
“We're in blue sky territory here, and the next figure the market will be looking for is $110,000.”
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