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$Dollar gains broadly, slips against yen as interest-rate policy in focusThe US Dollar (USD) rose broadly on Monday, holding near a two-year high, while the Japanese yen edged up from five-month lows against the greenback as traders continued to digest the likelihood that the Federal Reserve will make fewer rate cuts next year.
The US currency has rallied in recent weeks on expectations for a less dovish U.S. central bank as inflation remains above the Fed’s 2% annual target. Analysts also expect policies from President-elect Donald Trump’s US administration to both bolster growth and add to price pressures next year.
Fed policymakers this month cut their interest-rate forecast for 2025 to 50 basis points of cuts, from 100 basis points, and Fed Chair Jerome Powell said more reductions in borrowing costs now hinge on further progress in lowering inflation.
The dollar index is on track for a 6.7% gain this year. It was last up 0.18% on the day at 108.17, after reaching a two-year high of 108.54 on Dec. 20.
The yen has suffered from a wide interest-rate differential between Japan and the United States.
The dollar is on pace for a 11.4% return against the Japanese currency this year, its fourth yearly increase. It was last down 0.46% at 157.09 yen.
Some analysts see the yen as likely to benefit next year from expected Bank of Japan interest-rate hikes while the Fed eases, but with U.S. Treasury yields continuing to rise, this has not yet been captured in the exchange rate.
“With above-target inflation remaining persistent for much of 2024, price pressures could increase further should the yen weaken even more. To support its currency, the Bank of Japan may wish to start raising rates more meaningfully,” said Fawad Razaqzada, market analyst at City Index.
Currency Rates in Pakistan Today
Some Bank of Japan policymakers saw conditions falling into place for an imminent rate hike, with one predicting a move “in the near future,” a summary of opinions at the bank’s December meeting showed on Friday, keeping alive the chance