By Medha Singh and Kevin Buckland

(Reuters) -The U.S. dollar advanced on Wednesday, resuming its post-election rally after a three-day slide as investors awaited more clues on U.S. President-elect Donald Trump’s proposed policies, while the Japanese yen slid as safe-haven demand faded.

The previous day’s boost to the dollar and other traditional safe-haven currencies like the yen on geopolitical concerns proved short-lived, after Russia’s foreign minister said the country would “do everything possible” to avoid the onset of nuclear war, hours after Moscow announced it would lower its threshold for a nuclear strike.

The Russia-Ukraine “fears have died back but the market will be sensitive to any fresh news on that front”, said Jane Foley, head of FX strategy, at Rabobank in London.

The Japanese yen dropped to 155.815 against the greenback, retracing the previous day’s gains. The yen’s recent slide to a three-month low upped bets of a likely hawkish shift at the Bank of Japan as it nears levels that drew intervention in July.

Foley said 155 was the dollar-yen level that made markets nervous of intervention, adding that “if there is the possibility that verbal intervention is having a significant impact in stabilizing the currency pair, then that is likely to deter the ministry of finance, at least for a while, from using actual intervention”.

BOJ Governor Kazuo Ueda made only passing mention of the currency earlier this week.

The – which measures the currency against six major peers – advanced 0.5% to 106.59, recovering from a three-day slide.

The index hit a one-year high of 107.07 on Thursday last week, buoyed by expectations for big fiscal spending, higher tariffs and tighter immigration under the incoming U.S. administration, measures which economists say could foster inflation and potentially slow Federal Reserve easing.

“Having priced in a lot of the Trump trade, we might be in consolidation phase until early January when Trump does take the reins and we get a firmer idea of the detail of the policy,” Foley said.

‘TRUMP TRADE’

Investors are still waiting for Trump to name a Treasury Secretary, one of the highest-profile cabinet posts overseeing the country’s financial and economic policy. Some of Trump’s other picks have provoked controversy for their relatively meagre relevant experience.

“The ‘Trump Trade’ that boosted the greenback is facing challenges from Trump’s controversial cabinet nominations and the escalation in the Russian-Ukraine war,” DBS strategists wrote in a client note.

For the dollar over longer term though, “more weight should be put on firm economic data and the increasing likelihood that the Fed may have to slow the rate cut path even more in 2025”, they said.

Traders continue to pare back expectations for an interest-rate cut at the Fed’s next meeting in December, with bets now at 55.5%, down from 82.5% a week ago, according to CME’s FedWatch Tool.

Sterling got a brief boost before paring those gains as data showed stronger than expected jump in British consumer inflation in October supports the view that the Bank of England will lower interest rates only gradually in the coming months.

Traders currently see an 84% chance that the BoE will hold rates steady at its policy meeting next month.

The pound was last down 0.1% at $1.26695.

The euro dipped 0.4% to $1.0559, from far from the previous session’s low of $1.0524.

hovered near the all-time peak above $94,000 it hit overnight, carried by expectations for a friendlier regulatory environment for cryptocurrencies under Trump.

A report said Trump’s social media company was in talks to buy crypto trading firm Bakkt, bolstering hopes of a cryptocurrency-friendly regime under his administration.

Investing.com – Some of the post-election moves in the US dollar have already been partially reversed, and UBS looks for more of a consolidation at these levels rather than an even higher greenback in the near-term.

At 06:15 ET (11:15 GMT),   the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.4% higher at 106.612, bouncing after falling to a one-week low earlier in the session. 

The index had climbed to its highest level in a year last week in the wake of Donald Trump’s victory in the presidential election.

Many market participants believe that Trump 2.0 represents not just a re-run of the dollar-supportive US policies from 2018-19 but a much broader paradigm shift, analysts at the Swiss bank said, in a note dated Nov. 20.

Specifically, the idea that import tariffs can play a more substantial role in trade and fiscal policy should be consistent with USD appreciation via reduced imports as well as an incentive for the US trading partners to weaken their currencies.

“We have no strong reason to object to these views and have in fact argued that the core message of the second Trump administration implies a higher USD in 2025 and 2026,” UBS said.

The bank’s reservations are more tactical in nature. 

First, sustained range breakouts require a constant flow of dollar-positive headlines, and these may be in shorter supply at least before Trump’s inauguration as the recent in-fighting over the Treasury Secretary nomination has highlighted. 

Second, since breakevens have played an important role in pushing US nominal yields higher, real rate differentials are less supportive for the dollar than nominal ones. 

Third, the market seems to have reached a limit on pricing out Fed cuts over the next 12-15 months and could swing in the opposite direction on any hints of weakness in the US data. 

“For these reasons we still see a consolidation rather than an even higher USD in the near-term, with ending the year at 1.07, in our view,” UBS added.

Investing.com – The U.S. dollar rose Wednesday, boosted by its safe haven after the US closed its embassy in Kyiv, while sterling outperformed after UK inflation rose more than expected in October. 

At 04:45 ET (09:45 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.3% higher at 106.490, bouncing after falling to a one-week low earlier in the session. 

The index climbed to its highest level in a year last week in the wake of Donald Trump’s victory in the presidential election, buoyed by expectations for big fiscal spending, higher tariffs and tighter immigration, measures that could foster inflation and potentially slow Federal Reserve easing.

Geopolitics help dollar 

The dollar received a boost Wednesday after the United States shut its embassy in Kyiv due to “specific information of a potential significant air attack.” 

This warning came a day after Ukraine used US missiles to strike Russian territory, and Russian President Vladimir Putin changed the threshold for the use of his country’s nuclear arsenal.

The developments threaten to drag the West even further into the conflict between Russia and Ukraine, resulting in demand for the dollar.

“So far, this has translated to some noise in the FX market, but no big moves,” said analysts at ING, in a note. 

“We suspect the dynamics in dollar crosses were partly still affected by the dollar’s overbought positioning status, which may have contributed to curbing geopolitics-related gains.”  

With little on the economic data slate Wednesday, investors will focus on commentary from Federal Reserve Governors and , as well as Boston Fed President for clues of future Fed monetary policy decisions.

Traders continue to pare back expectations for an interest-rate cut at the Fed’s next meeting in December. Odds now stand at 58.9%%, down from 82.5% a week ago, according to CME’s .

UK inflation surprises to upside

In Europe, fell 0.1% to 1.2671, trading marginally lower due to the strength of the US dollar even as UK CPI data was stronger than expected in October, casting doubt about a rate cut by the Bank of England in December.

Consumer prices rose by an 2.3% last month, above the 2.2% rise expected, and by 0.6% on a basis in October, the biggest month-to-month rise in the annual CPI rate since October 2022.

This rise comes before the impact of the first budget of Britain’s new government, which included higher taxes on companies, is felt. 

The Bank of England said the budget was likely to add to inflation next year, and Governor Andrew Bailey on Tuesday stressed the central bank’s message that borrowing costs are likely to come down only gradually.

“Even if there is another inflation print before the next BoE meeting, we would probably need a sharp slowdown in services inflation to put a cut back on the table,” ING added.

traded 0.3% lower to 1.0560, with the expected to continue cutting interest rates given the lack of serious growth in the region while inflation has fallen back to target.

ECB policymaker Fabio Panetta said on Tuesday the central bank should cut interest rates so they no longer curb economic growth, or so they even stimulate it, and give more guidance now that post-pandemic shocks are abating and inflation is normalising.

“With inflation close to target and domestic demand stagnant, restrictive monetary conditions are no longer necessary,” he said.

PBoC keeps rates unchanged

rose 0.7% to 155.80, with the Japanese yen remaining fragile after Japan reported a bigger-than-expected in October. 

The focus is now turning to upcoming data from the country on Friday.

climbed 0.1% to 7.2462, hovering around three-month highs.

The People’s Bank of China left its benchmark unchanged as widely expected, after trimming the rate last month.

Wednesday’s hold came on the heels of several more stimulus measures from China since late-September, although Beijing is yet to unlock more targeted fiscal measures.