By Stefano Rebaudo

(Reuters) -The U.S. dollar held firm on Wednesday before the Federal Reserve policy meeting later in the session which is expected to deliver a hawkish cut, trimming rates but suggesting less monetary easing ahead.

Analysts recalled that the assumption that the Fed would reduce its level of 2025 easing had propped up the dollar recently, while markets kept pricing a 25 basis point rate cut.

“We foresee a hawkish shift in the dot plot, consistent with the movement in market expectations since the last update in September,” said David Doyle, head of economics at Macquarie.

“Chair Powell is likely to stress a slower pace of easing ahead, uncertainty over the neutral rate, and the data dependence of the policy outlook,” he argued, adding that beyond this meeting, he sees just one 25 bps cut in 2025.

The , which measures the greenback against six rivals, was up 0.05% at 106.97 after hitting its highest since Nov. 26 at 107.18 on Monday.

“We think they will pause (cutting rates in January),” said Padhraic Garvey, regional head of research, Americas at ING.

“It’s unlikely they telegraph that intention explicitly.”

Data on Tuesday yet again showed a resilient U.S. economy after retail sales beat expectations, but investors are also weighing the possible impact of promised tariffs and tax cuts by the incoming Trump administration. 

If the target range for the federal funds rate is cut by 25 bps “this should be seen as a technical tweak, rather than a monetary policy decision,” said Philip Marey, senior U.S. strategist at RaboBank, who expects one 25 bps rate cut in 2025.

“They (the Fed) will have to stop much earlier and at a higher level than they now expect. They could even be forced to start hiking again if inflation gets out of control,” he added mentioning expected U.S. tariffs.

The current dot plot projects the Fed to deliver four 25 bp cuts next year.

The euro sat at $1.0495.

More upbeat economic news out of the U.S. amid dour expectations for Chinese economic growth sent the and down. China is Australia’s largest two-way trading partner.

The Australian dollar slid to $0.6310, its lowest since October 2023. It was last down 0.35% at $0.6313.

The kiwi touched a fresh two-year low of $0.5731.

The traded at 7.2945 per dollar on Tuesday, holding steady near a 13-month low against the dollar.

Against the yen, the greenback was down 0.16% at 153.7, having given up some of its recent gains in the previous session as U.S. Treasury yields fell. [US/]

Markets have reduced bets that the Bank of Japan will raise rates on Thursday in favour of a January hike, after a slew of media reports, but expect the BoJ to provide some rate outlook.

“The BoJ’s relative lack of urgency around the timing of its next hike may also be attributed to the current forex backdrop,” said Izumi Devalier, Japan and Asia Economist at BofA Japan.

“The BoJ’s decision to hike in July was in part due to concerns over a sharp weakening of the yen and resurgence in upside inflation risks.”

Japan’s exports rose for a second straight month in November, data showed on Wednesday.

The Bank of England is also expected to hold rates steady on Thursday. Sterling dropped versus the euro and the dollar as investors look at the Fed policy meeting and after British inflation data was in line with expectations.

Among other central banks meeting this week, Sweden’s Riksbank is widely expected to cut rates by as much as half a point, while the Norges Bank is set to leave rates unchanged.

The Norwegian crown dropped 0.30% at $11.2279. In May 2023, it hit $11.30, its lowest level since March 2020.

In cryptocurrencies, bitcoin was last down 1.2% to $105,184 after hitting a high of $108,379.28 in the previous session.

Investing.com– Most Asian currencies moved in a tight range on Wednesday, while the dollar remained near three week highs as traders hunkered down in anticipation of more cues on interest rates from the Federal Reserve. 

Reports of more fiscal spending in China did little to improve sentiment towards regional currencies, with the yuan hovering around its weakest levels in 13 months. 

Beyond the Fed, central bank decisions in Japan, Thailand, Indonesia and the Philippines are also due this week, providing more cues on Asian monetary policy going into 2025. 

Most regional currencies were nursing losses against the dollar in recent sessions as traders largely turned to the greenback in anticipation of a slower pace of rate cuts in 2025. 

Dollar steady with Fed outlook in focus 

The and both steadied in Asian trade, remaining in sight of a three-week high hit earlier this week. 

The Fed is widely expected to . But traders are bracing for a potentially hawkish outlook from the central bank, especially in light of recent data showing U.S. inflation remained sticky, and the labor market strong.

The central bank is expected to signal a slower pace of easing in 2025, with several analysts, including Goldman Sachs, predicting a hold in January. 

Stronger-than-expected data for November, released on Tuesday, furthered expectations that the Fed will have enough headroom to cut rates at a slower pace.

Expansionary and protectionist policies under incoming President Donald Trump are also expected to underpin inflation and rates in the coming years.

Chinese yuan near 13-mth low; fiscal target offers little support 

The Chinese yuan’s pair rose 0.1% on Wednesday, and was close to its highest level since November 2023. 

Reuters reported that China was planning to increase its budget deficit to 4% from 3% of gross domestic product in 2025, and was also targeting 5% annual GDP growth for a third consecutive year. 

While the move does entail higher fiscal spending, it also heralds pressure on the yuan, given that China will likely further loosen monetary conditions to facilitate its plans for increased stimulus. 

BOJ, Asian central banks awaited 

Focus this week is also on a string of key Asian central bank meetings. Most notably is the , which kicked off a two-day meeting on Wednesday.

The Japanese yen was muted, with the pair hovering above 153.5 yen amid uncertainty over what the BOJ will do. Analysts are split between expectations for a hold or a 25 basis point hike. 

The Thai baht’s pair rose 0.2%, with the widely expected to keep rates steady later on Wednesday. The Indonesian rupiah’s pair was also flat, with the country’s set to keep rates unchanged on Wednesday.

The Philippine peso’s pair tread water before a central bank meeting on Thursday, where the is expected to cut rates for a third time this year.

Broader Asian currencies moved in a flat-to-low range. The Australian dollar’s pair fell 0.3%, while the Singapore dollar’s rose 0.1%.

The South Korean won’s pair fell 0.2% amid continued reassurances of economic stability from the government, after President Yoon Suk Yeol’s failed bid to impose martial law. 

The Indian rupee’s pair steadied after briefly hitting a record high above 85 rupees earlier in the session. The currency was battered by sustained capital outflows from India, while weak also weighed. 

By Chibuike Oguh

NEW YORK (Reuters) -The U.S. dollar gained against major currencies on Tuesday following better-than-expected retail sales data that showed underlying economic momentum while markets braced for interest rate moves from the Federal Reserve and other central banks.

Commerce Department data on Tuesday showed U.S. retail sales surpassed expectations by jumping 0.7% in November, backed by an uptick in motor vehicle and online purchases.

Markets expect the Fed will deliver a 25-basis-point interest rate cut at the end of its two-day policy meeting on Wednesday, with futures implying a nearly 97% chance of a cut, according to the CME’s FedWatch tool.

Against the Swiss franc, the dollar edged lower by 0.2% to 0.89270 in choppy trading, after hovering near its highest level since July. The euro, which is heading for a drop of nearly 5% against the dollar this year, was down 0.24% at $1.048825.

The – which tracks the currency against six others – rose 0.17% to 106.97, after trading as high as 107.08 on the session.

“The market is trying to debate whether it’s time to fade the dollar, which has had an incredible run this year,” said Marvin Loh, senior global market strategist at State Street (NYSE:) in Boston.

“But it seems hard to really push back against U.S. exceptionalism and a stronger dollar going into the new administration, whether we’re talking about a Fed that will probably not seem as dovish as it did in September or the challenges that keep popping up in the emerging and developed markets that make the dollar a safe haven.”

The pound sterling rose against the dollar after data showed British wage growth picked up more strongly than expected in the three months to October. The Bank of England will announce its rate decision on Thursday. The sterling strengthened 0.16% to $1.27040.

The yen strengthened against the dollar, as markets have scaled back the chances of a rate hike by the Bank of Japan this week in favor of a move in January. It rose 0.42% against the greenback to 153.52 per dollar.

The dollar weakened 0.06% to 7.287 versus the offshore , as dour expectations for Chinese economic growth pinned yields near record lows.

The Australian dollar weakened 0.6% versus the greenback to $0.6332, while the Swedish crown weakened 0.76% versus the dollar to 10.964. The Norwegian Krone was also down 0.56% to 11.2052 against the greenback.

Sweden’s Riksbank is expected to cut rates by as much as half a point this week, while Norges Bank will likely leave rates unchanged.

rose as high as $108,379.28, trading near the $110,000 mark, before paring gains and was up 0.68% to $106,798.26.

“I think that the market is worried that they’re going to be only two cuts in the (Fed’s closely watched dot plot) next year; so it’s a little bit dollar positive,” said Steve Englander, global head of G10 FX Research and North America macro strategy at Standard Chartered (OTC:) Bank in New York.

Currency bid prices at 17 December​ 08:55 p.m.              

GMT

Description RIC Last U.S. Close Previous Session Pct Change YTD Pct High Bid Low Bid

Dollar index 106.97 106.79 0.19% 5.52% 107.08 106.69

Euro/Dollar 1.0487 1.0514 -0.25% -4.99% $1.0536 $1.0479

Dollar/Yen 153.53 154.125 -0.56% 8.66% 154.245 153.185

Euro/Yen 161.01​ 162.03 -0.63% 3.46% 162.47 160.78

Dollar/Swiss 0.8928 0.8947 -0.21% 6.08% 0.8975 0.8916

Sterling/Dollar 1.2706 1.2684 0.16% -0.17% $1.2728 $1.2669​

Dollar/Canadian 1.4312 1.4243 0.5% 7.98% 1.4324 1.4233

Aussie/Dollar 0.6332 0.6371 -0.61% -7.13% $0.6378 $0.6332

Euro/Swiss 0.9361 0.94 -0.41% 0.81% 0.9417 0.9356

Euro/Sterling 0.8252 0.8286 -0.41% -4.8% 0.8295 0.825

NZ Dollar/Dollar 0.575 0.5783 -0.55% -9% $0.5793 0.5751

Dollar/Norway 11.2061​ 11.1429 0.56% 10.56% 11.2146 11.1343

Euro/Norway 11.7517 11.7229 0.25% 4.7% 11.774 11.7184

Dollar/Sweden 10.9697 10.8745 0.88% 8.97% 10.9713 10.8712

Euro/Sweden 11.5048 11.4389 0.58% 3.41% 11.5085 11.4402