Dollar Soars to Four-Week High Amid Fed Rate Cut Speculations

The U.S. dollar traded near a four-week high against the euro due to persistent U.S. inflation, affecting Federal Reserve interest rate cut expectations. A 25-basis point reduction is expected from the ECB. Meanwhile, the dollar saw fluctuations against the yen and other currencies, impacted by various central bank statements and market movements.

The U.S. dollar hovered near a four-week high against the euro on Thursday, driven by ongoing U.S. inflation concerns that tempered expectations of a substantial interest rate cut by the Federal Reserve next week.

In contrast, the European Central Bank (ECB) is predicted to announce a quarter-point rate cut later on Thursday. Investors are keen on clues regarding future ECB rate adjustments. The dollar also climbed against the yen after a volatile trading session on Wednesday. Initially, the yen surged by 1.24%, hitting its peak for the year, but later receded after new U.S. consumer price index data was released.

Early on Wednesday, Bank of Japan board member Junko Nakagawa maintained a tightening stance, signaling potential for further rate hikes. Another BOJ board member, Naoki Tamura, will speak on Thursday. The U.S. CPI saw a 0.2% rise last month, consistent with July. Excluding food and energy, the CPI increased by 0.3%, up from July's 0.2%.

(With inputs from agencies.)