US President Donald Trump said this week he will announce his choice to succeed Powell early next year, extending a months-long selection process despite previously saying he had already chosen a candidate.Analysts say a move to appoint Hassett could put pressure on the dollar, with bond investors expressing concerns to the US Treasury that Hassett could aggressively cut rates to align with Trump’s preferences, the Financial Times reported.
Traders estimate an 89% chance of a quarter-point rate cut next week, CME FedWatch showed, with an expected easing of 89 basis points by the end of next year. Analysts are skeptical about how long and deep the easing cycle will last.
Thomas Mathews, head of markets for the Asia-Pacific region at Capital Economics, said that given the strength of the US economy, investors may be overestimating how far the Fed will cut spending in the medium term, regardless of what it does next week.
“That, I think, will keep the dollar from falling too far,” he said.
Still, the dollar index, which measures the U.S. currency against six rivals, stood at 98.919 and languished near a five-week low. The index is down almost 9% this year.
Thierry Wizman, global currency and interest rate strategist at Macquarie, said the sudden realization of better data abroad and wage growth signals in Japan, combined with the prospect of Hassett being the next Fed chairman, has likely helped other currencies rise as the dollar has fallen.
The euro held steady at $1.1674 in Asian hours, after breaking its highest level since Oct. 17 in the previous session as data showed euro zone business activity grew at the fastest pace in 30 months in November.
The currency is up more than 12% this year, on pace for its biggest annual gain since 2017, benefiting from a weak dollar due to rate uncertainties earlier this year and rising chances of US rate cuts lately.
The European Central Bank is due to meet in two weeks and is widely expected to keep interest rates on hold, with markets putting only a one in four chance of an easing next year.
The yen was little changed at 155.18 per U.S. dollar as concerns about intervention by Tokyo authorities eased somewhat, even as Japanese bonds sold off this week on budget concerns over a massive spending plan by Prime Minister Sanae Takaichi.
Markets now expect the Bank of Japan to raise rates in two weeks, after hints from BOJ Governor Kazuo Ueda eased some pressure on the yen.
Sterling was at $1.33425, hovering around its highest since October 28. The Australian dollar last fetched $0.66075, while the New Zealand dollar was trading at $0.5774. Both traded at their highest levels in more than a month.
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