By Karen Brettell and Amanda Cooper

(Reuters) – The dollar held onto earlier losses on Thursday after Federal Reserve Chair Jerome Powell failed to offer any strong clues that the U.S. central bank was likely to pause rate cuts in the near-term, after a widely expected 25 basis point reduction.

Traders also closed out some profitable bets on a Donald Trump presidency after his election victory on Tuesday.

Fed policymakers took note of a job market that has “generally eased” while inflation continues to move towards the U.S. central bank’s 2% target.

A much stronger than expected jobs report for September raised expectations that the Fed may make fewer rate cuts, though was followed by surprisingly weak data for October. Analysts said that jobs gains last month were hurt by hurricanes and labor strikes.

In Powell’s comments “there was no indication that a pause is under consideration at the Fed. It sounds like they want to get below 4% or very close before thinking about pausing. That’s a surprise given the strength of economic data,” said Adam Button, chief currency analyst at ForexLive in Toronto

Powell also said that the election won’t impact Fed policy in the near-term, saying the U.S. central bank won’t speculate on how policies will affect Fed goals.

Traders are pricing 75% odds the Fed will cut rates again in December, up from 69% on Wednesday, according to the CME Group’s (NASDAQ:) Fed Watch Tool.

The was last down 0.67% at 104.40. It hit a four-month high of 105.44 on Wednesday as investors priced in Trump policies.

Trump is expected to clamp down on illegal immigration, enact new trade tariffs, maintain or introduce new tax cuts and loosen business regulations, which analysts see as boosting growth and inflation.

The dollar weakened on Thursday, however, as traders closed some of these positions.

“In the three weeks prior to the election there was a lot of dollar buying and positioning was already quite long the dollar, so I think today’s reversal is probably explained by some of these red sweep trades that were put on before the election maybe being partially squared,” said Vassili Serebriakov, an FX strategist at UBS in New York.

Republicans also won the Senate majority, putting the party on track for a clean sweep that would allow it to make larger legislative changes. They are leading the race to win the House of Representatives, though this has yet to be decided.

Serebriakov added that further large gains in the U.S. currency may be unlikely before the impact of new policies including tariffs is felt over the coming two years.

Some market participants are also speculating that tariffs may be used as a negotiating tool and that Trump won’t necessarily introduce all the policies he has campaigned on.

“The market is pricing in a return of the first version of Trump, not the guy who is saying he’s putting on 10 percent across-the-board tariffs,” said Button.

Sterling rose after the Bank of England cut interest rates by 25 basis points but said it expected UK inflation and growth to pick up more quickly than it had previously anticipated.

It was last up 0.78% at $1.2979.

The euro rose 0.62% to $1.0794.

The single European currency shrugged off political crisis in Germany, where the already awkward coalition led by Chancellor Olaf Scholz collapsed late on Wednesday.

The greenback fell 1.05% to 153.01 yen.

The Japanese currency is likely to be hurt by a wide interest rate differential with the United States following Trump’s victory. That could heighten pressure on the Bank of Japan to raise interest rates as soon as December to prevent the yen from sliding back toward three-decade lows.

Sweden’s Riksbank cut rates by half a point, as expected, leaving the crown up 1.74% against the dollar, while Norges Bank left Norwegian rates unchanged, with the greenback tumbling around 1.8% against the currency.

gained 0.74% to $76,543, after earlier reaching a record $76,980.

Trump is expected to enact a more favorable regulatory environment for the crypto industry.

Investing.com — Citi strategists encouraged investors to “buy US dollar dips tactically” in the wake of Donald Trump’s win in the elections.

The bank expects the greenback to see further upside, especially against the euro (EUR) and Scandinavian currencies (Scandies), citing the recent underperformance of these currencies.

Despite the uncertainty surrounding the House’s outcome, strategists note that the lack of ticket-splitting could suggest a “red wave” is more likely with a Trump win, strategists said in a note.

They believe that foreign exchange (FX) markets will continue to focus on tariff-sensitive currencies, as fiscal policy developments may take time to materialize. Market participants may also await confirmation of the House going to the Republicans before expecting broader fiscal policy changes.

Citi’s team voiced caution about immediately following the USD rally, pointing out that the market is already somewhat long on USD and anticipating the Federal Reserve (Fed) to maintain a dovish stance in its upcoming meeting on Thursday.

The firm points out that its strategy typically avoids chasing momentum, preferring to wait for a potential dip in USD following the Fed’s meeting to buy into the currency.

In the report, strategists also flagged downside potential in currencies vulnerable to tariffs, such as the (CNH), (TWD), and (THB), which are considered clear shorts.

In the G10 currencies, the EUR is seen as an obvious candidate for selling due to its bilateral trade surplus with the US.

“This also extends towards Scandies (NOK and SEK), which are effectively higher beta EUR,” strategists led by Daniel Tobon noted.

“NOK could also underperform on weaker oil under Trump, though we note NOK and oil correlations tend to be short-lived,” they added.

SEK, meanwhile, remains highly sensitive to the global manufacturing cycle, and strategists expect trade and tariff wars to “remain disruptive to a manufacturing recovery.”

Citi maintains that a full “red sweep” in the US elections could justify a 5% appreciation in the USD. The bank’s analysis suggests there is still room for a further 3.4% downside in before the impact of Trump’s policies is fully reflected in the currency pair.

The bank said it will be watching for a re-test of the trend line at around 1.0790 to sell into, with tactical supports around 1.06-1.0630, but they do not rule out a move towards 1.0350-1.0450 based on their residual analysis.

Investing.com– Most Asian currencies steadied on Friday after clocking sharp gains in the prior session, while the dollar nursed some losses after the Federal Reserve cut interest rates as widely expected.

Regional currencies recouped a bulk of their weekly losses after the Fed’s move, with some even turning positive for the week. The dollar, on the other hand, tumbled from four-month highs, with some traders also locking in recent gains. 

Focus was also on more cues on fiscal stimulus from China, as a meeting of the country’s Nation People’s Congress entered its final day.

Dollar nurses tumble from 4-mth high after Fed rate cut 

The and both steadied in Asian trade, steadying from a sharp drop on Thursday after the Fed to a range of 4.50% to 4.75%. 

The greenback had shot up to a four-month high earlier in the week after Donald Trump won the 2024 presidential election, with Trump’s policies potentially heralding stickier inflation in the long term.

The Fed said a change in U.S. leadership was unlikely to affect monetary policy in the near-term. Chair Jerome Powell signaled that the economy was in a good place, and that the bank was likely to ease policy further in the coming months.

Traders were seen pricing in a 76.5% chance the Fed will cut rates by 25 bps in December, and a 23.5% chance rates will remain unchanged, showed.

Chinese yuan fragile with NPC in focus 

The Chinese yuan- which was among the worst hit by dollar strength this week- weakened slightly on Friday, with the pair rising 0.2%. The pair was also set to rise 0.4% this week.

Focus was squarely on the NPC meeting, which concludes on Friday, for more cues on Beijing’s plans to roll out fiscal stimulus. 

Analysts expect the government to approve at least 10 trillion yuan ($1.6 trillion) in fresh spending for the coming years. The NPC meeting comes after Beijing announced a slew of stimulus measures over the past month, but did not specify their timing or scale.

Broader Asian currencies mostly weakened on Friday, but were sitting on strong gains from the prior session following the Federal Reserve’s interest rate cut.

The Japanese yen was an outlier, with the pair falling 0.2% and further away from three-month highs after Japanese ministers issued fresh verbal warnings over potential intervention in the currency market.

The Australian dollar’s pair fell 0.4%, but was headed for a nearly 2% weekly gain. The South Korean won’s pair rose 0.4%, while the Singapore dollar’s pair rose 0.1%.

The Indian rupee was a major laggard this week, with the pair surging to record highs above 84.4 rupees. The pair remained close to these highs on Friday.