By Medha Singh and Kevin Buckland
(Reuters) -The U.S. dollar climbed from a one-week low on Wednesday, while the Japanese yen fell as safe-haven demand waned and investors waited for more clues about newly-elected U.S. President Donald Trump’s proposed policies.
The previous day’s boost for the dollar and other traditional safe-haven currencies such as the yen proved short-lived, after Russia’s foreign minister said the country would “do everything possible” to prevent the start of a nuclear war. hours after Moscow announced it would cut interest rates. the threshold for a nuclear attack.
Fears about Russia and Ukraine have “ebbed away, but the market will be sensitive to renewed news or news on that front,” said Jane Foley, head of FX strategy at Rabobank in London.
The Japanese yen fell to 155.67 against the dollar, a sign of the previous day’s gains. The yen falls to a three-month low, signaling a likely aggressive shift at the Bank of Japan as it approaches levels that prompted intervention in July.
Foley said 155 was the dollar-yen level that made markets nervous about intervention, adding that “if there is a possibility that verbal intervention has a significant impact on stabilizing the currency pair, the Treasury Department will likely deter, at least for a while, from the use of actual intervention”.
BOJ Governor Kazuo Ueda made only passing mention of the currency on Monday.
The currency, which measures it against six major peers, rose 0.3% to 106.42, recovering from a three-day decline.
The index hit a one-year high of 107.07 last Thursday, buoyed by expectations for big budget spending, higher tariffs and tighter immigration under the incoming US administration; measures that economists say could boost inflation and possibly slow Federal Reserve easing.
“Now that we have priced in a lot of the trade with Trump, we may be in the consolidation phase until early January when Trump takes control and we get a better idea of the details of the policy,” Foley said.
‘TRUMP TRADE’
Investors are still awaiting Trump’s nomination as Treasury secretary, one of the most prominent Cabinet posts overseeing the country’s financial and economic policies. Some of Trump’s choices have sparked controversy because of their relatively meager relevant experience.
“The ‘Trump Trade’ that boosted the dollar is facing challenges from Trump’s controversial cabinet nominations and the escalation of the Russian-Ukrainian war,” DBS strategists wrote in a client note.
For the longer-term dollar, however, “more weight should be given to strong economic data and the increasing likelihood that the Fed will have to slow rate cuts even further in 2025,” they said.
Traders continue to lower expectations for a rate cut at the next Fed meeting in December. According to CME’s FedWatch Tool, the odds are now 59.1%, up from 82.5% a week ago.
Sterling got a brief boost after data showed British consumer inflation accelerated faster than forecast in October, supporting views that the Bank of England will cut interest rates only gradually in coming months. The pound was last flat at $1.26775.
BoE Governor Andrew Bailey told parliament on Tuesday that the central bank should take a “gradual approach” to the easing.
Traders currently see an 84% chance that the BoE will keep rates steady at its policy meeting next month.
The euro fell 0.3% to $1.056, after recovering from a decline to $1.0524 in the previous session.
crept up to a record peak above $94,000 overnight, buoyed by expectations for a friendlier regulatory environment for cryptocurrencies under Trump.
According to a report, Trump’s social media company was in talks to acquire crypto trading firm Bakkt, boosting hopes for a cryptocurrency-friendly regime under his administration.
