The dollar hovered near a five-week low as markets priced in a Federal Reserve rate cut next week, keeping the greenback under pressure against its major peers.
Trading desks broadly expect a quarter-point reduction when the Federal Open Market Committee meets on December 9-10, and eyes will be on signals about how much easing could follow.
The dollar index, which tracks the currency against six rivals, was little changed at 99.065 in early Asia trade. A small recovery overnight ended a nine-day decline, though the index had slipped to a five-week low of 98.765 earlier in the session and is tracking for a roughly 0.4% drop on the week.
Markets assign about an 86% probability of a rate cut next Wednesday, with the possibility of two to three additional reductions in the coming year, according to LSEG data.
Fed officials have emphasized monitoring the labor market to gauge whether more support is needed for the economy.
U.S. data released overnight showed unemployment-benefits claims dipping to a multi-year low last week, though the figures may be distorted by the Thanksgiving holiday. The broader data picture remains incomplete due to the government shutdown, which delayed some releases and left others uncollected.
Crucial monthly payrolls figures were expected later Friday but have been delayed, and the prior month’s numbers were not released.
Among inflation gauges, the personal consumption expenditures (PCE) deflator—the Fed’s preferred metric—will be published later Friday, though it covers September data. Economists surveyed by LSEG forecast a 0.2% monthly rise in the core PCE for September.
One analyst noted that an overall core PCE increase of 0.2% or less would support a rate cut at the next FOMC meeting, while suggesting the risk of a softer 0.1% rise.
In the meantime, the dollar traded around 155.18 yen, with the euro steady near $1.1647 and the pound at $1.3326 after retreatting from a six-week high midweek.
The dollar’s downside has been amplified by a growing debate about leadership at the Fed, with discussions around Kevin Hassett potentially taking over leadership after Jerome Powell’s term ends in May and expectedly advocating for more rate cuts.
Next week will bring a flood of central-bank decisions: Australia’s central bank on Tuesday, Canada’s on Wednesday, and Switzerland’s on Thursday. The following week features policy meetings from the European Central Bank, the Bank of England, Sweden’s Riksbank, and the Bank of Japan.
Several sources told Reuters that the Bank of Japan is likely to raise rates this month, though the trajectory afterward remains uncertain, with markets pricing in only one more hike next year and about a 50% chance of another.
The Australian dollar held steady around $0.6609 after briefly touching a two-month high of $0.6624 on Thursday.
In other currencies, Canada’s loonie traded near C$1.3961 per U.S. dollar, and the Swiss franc was stable around 0.8035 per dollar after slipping from a two-week high of 0.7992 earlier in the session.
Reporting by Kevin Buckland; Editing by Stephen Coates
