Investing.com – The U.S. dollar slipped slightly lower Thursday, but remained close to three-month highs underpinned by expectations for a slower pace of interest rate cuts by the Federal Reserve ahead of the upcoming US presidential election.

At 04:05 ET (08:05 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 104.095, not far removed from levels last seen at the end of July. 

Beige Book helps the dollar 

The dollar has been in demand as recent economic data has pointed to the US economy holding up reasonably well, suggesting that the Federal Reserve can be less aggressive in its easing than had previously been expected.

The Federal Reserve’s , released Wednesday, said that economic activity was little changed since early September, while the labor market continued to show signs of strength.

The unchanged outlook on the economy comes amid a string of stronger economic data released recently, including the stronger September jobs report and retail sales.

Markets are currently pricing in just short of 50 basis points of cuts for the rest of the year, pointing to a likely cut of 25 bps in November.

Also helping the US currency is the proximity to the U.S. presidential election, as investors are also increasingly positioning ahead of the poll early next month. 

“Volatility will probably rise into the 5 November election,” said analysts at ING, in a note, “and assuming that Donald Trump continues to perform well in the polls, the dollar should stay bid.”

Euro gains after PMI data

In Europe, edged 0.2% higher to 1.0797, with traders digesting the latest economic activity data from the eurozone region.

The news remained grim, with the release falling to 47.3 in October from 48.6 in September, but the offered some hope, with the country’s composite PMI release rising to 48.4 in October, up from 47.5 the previous month and the expected 47.6.

While below 50, and thus still in contraction territory, the data pointed to an improvement in the region’s most important economy.  

That said, the has already cut rates three times this year from a record high, and further easing at each of its upcoming meetings this year looks likely.

“With inflation in abeyance and business confidence low, this is fertile ground for the ECB doves,” said ING. “We tentatively see something like a 1.0765-1.0850 EUR/USD range for the time being.”

rose 0.3% to 1.2961, bouncing after the pair dipped to a more than five-week low of in the previous session, ahead of the release of the October UK PMI data. 

Yen receives support

fell 0.4% to 152.19, slipping back slightly after climbing to a near three-month high in the prior session.

The yen saw some support after Japanese government officials warned against “one-sided” moves in currency markets, in light of recent weakness in the yen. Their comments spurred some fears of currency market intervention.

fell 0.2% to 7.1111, with the yuan recovering slightly from a near two-month high hit earlier this week, with the focus turning to an upcoming meeting of China’s National People’s Congress for more cues on fiscal spending.

Investing.com– Most Asian currencies steadied from recent losses on Thursday with the Japanese yen remaining close to near three-month lows, while the dollar remained underpinned by expectations of slower interest rate cuts. 

Regional currencies were battered by increased risk aversion in markets, as anticipation of a tight U.S. presidential race also kept traders on edge, as did heightened concerns in the Middle East. 

Risk aversion benefited the dollar and gold. But the Japanese yen saw little safe haven demand, amid doubts over just how much headroom the Bank of Japan has to keep raising interest rates. 

Broader Asian currencies were also skittish as traders awaited more cues on stimulus measures in China. 

Japanese yen steadies amid intervention warnings

The Japanese yen’s pair fell slightly on Thursday after racing to a near three-month high in the prior session.

The yen saw some support after Japanese government officials warned against “one-sided” moves in currency markets, in light of recent weakness in the yen. Their comments spurred some fears of currency market intervention.

The yen took few cues from weak data, which showed a contraction in business activity in October. 

The yen remained fragile amid growing doubts over more rate hikes by the BOJ, especially in anticipation of Japanese general elections this Sunday. 

The ruling Liberal Democratic Party could potentially need to seek a coalition to maintain power, shifting Japan’s political landscape and limiting the BOJ’s ability to make changes in monetary policy.

The BOJ is set to meet next week and is widely expected to keep rates steady. Before that, from Tokyo is due on Friday. 

Dollar strong as yields rise amid bets on smaller rate cut 

The and fell slightly in Asian trade, but remained close to near three-month highs. Gains in the dollar came tracking a sharp increase in Treasury yields. 

The greenback was boosted by growing bets that the Fed will cut rates by a smaller 25 basis points in November, amid persistent signs of resilience in the U.S. economy.

due later in the day is expected to provide more cues on that front. 

On the election front, improved odds for Republican nominee Donald Trump also buoyed the dollar, on bets that his policies will be inflationary. 

Broader Asian currencies firmed slightly on Thursday as they recouped some recent losses. 

The Australian dollar’s pair rose 0.2% after mixed data, while the South Korean won’s pair was flat after weaker-than-expected showed the economy barely grew in the third quarter. 

The Chinese yuan’s pair fell 0.2%, recovering slightly from a near two-month high hit earlier this week. 

The Singapore dollar’s pair fell 0.1%, while the Indian rupee’s pair fell slightly from near record highs.