Anna 
On Wednesday, the U.S. dollar staged a recovery from a 2-1/2 month low as the Federal Reserve’s meeting minutes suggested that interest rates would likely remain at restrictive levels despite the apparent conclusion of the rate-hike cycle.
The minutes disclosed the central bank’s commitment to proceed “carefully,” with “all participants judging it appropriate to maintain” the existing rate setting. Fed officials underscored their intention to raise interest rates only if progress in controlling inflation faltered, aligning with recent statements that left room for further tightening, even as market expectations lean towards rate cuts in early 2024.
Markets currently anticipate the Federal Reserve to keep rates steady at their December meeting, with approximately a 27% chance of a rate cut as early as March, according to CME’s FedWatch Tool.
Niels Christensen, Chief Analyst at Nordea, cautioned against the aggressiveness of market expectations, stating, “Almost four rate cuts are fully priced for next year, and that looks very aggressive.” He added that while it’s not uncommon for the Fed to implement 50 basis points in initial cuts, it remains a possibility.
The dollar index, measuring against a basket of currencies, recorded a 0.2% increase to 103.78, distancing itself from the lowest level since late August at 103.17, reached on Tuesday. November saw a 2.6% decline in the index, setting it on track for its most significant monthly drop in a year.
Analysts noted a desire among market participants to secure profits before the U.S. Thanksgiving Holiday, highlighting a potential decline in liquidity.
High U.S. Treasury yields, previously supporting the dollar, have retreated from multi-year highs in October. This adjustment follows increased speculation that the Fed has completed its rate hikes due to a slowdown in U.S. inflation in the same month. The yield on the benchmark 10-year note slipped again, currently standing at 4.4003%.
The euro settled at $1.0894 after reaching $1.09655 on Tuesday, its highest level against the dollar since mid-August. Sterling declined by 0.2% to $1.2518, staying close to its two-month high of $1.2558 reached on Tuesday.
Meanwhile, the Japanese yen experienced a 0.6% decrease to 149.265 per dollar after hitting a two-month high of 147.155 on Tuesday. Despite a 1.6% increase against the dollar in November, the yen remains down by 12% for the year.
Speculation about the Bank of Japan potentially exiting from negative interest rates early next year is seen as a stabilizing factor for the Japanese currency. However, analysts currently believe the risk of intervention has diminished.
In the cryptocurrency realm, bitcoin rose by 2.3% to $36,569 a day after prosecutors announced that Binance chief Changpeng Zhao would step down and plead guilty to breaking U.S. anti-money laundering laws, part of a $4 billion settlement resolving a lengthy investigation into the world’s largest crypto exchange.
