Dollar Near Yearly Low Ahead of Expected Fed Rate Cut

The U.S. dollar traded near its lowest levels of the year on Tuesday, ahead of an anticipated rate cut by the Federal Reserve. With economic data set to be released and the Fed's decision imminent, the market speculates whether a 25 or 50 basis point cut will occur. Other major currencies, including the euro, yen, and sterling, are also experiencing fluctuations amid this financial uncertainty.

The U.S. dollar hovered near its lowest levels of the year on Tuesday, amid mounting speculation about a potential rate cut by the Federal Reserve. Investors are eagerly awaiting the central bank's decision, with many betting on a significant move.

As of 08:30 GMT, the euro was steady at $1.1133, close to its yearly peak of $1.1201. Meanwhile, the yen retreated to 140.58 after a brief surge during the holiday-thinned session on Monday. Futures markets indicate a growing expectation for a 50 basis point rate cut, with the odds rising sharply from just a week ago.

Senior forex strategist Jane Foley commented that any signs of weakness in upcoming U.S. economic data could further reinforce market expectations for a substantial rate cut. Analysts at Macquarie have also suggested that a dovish stance from the Fed could weaken the dollar, particularly against the yen, due to the contrasting monetary policies of the Fed and the Bank of Japan.

(With inputs from agencies.)