Dollar Dominance: Fed's Rate Shift Lifts U.S. Currency

The U.S. dollar rose to its highest point in over two months against major currencies, fueled by expectations of modest Federal Reserve rate cuts. Despite anticipated slower easing, influential comments and resilient U.S. economic data have strengthened the dollar, while other global currencies weaken.

The U.S. dollar is reaching new heights, hitting its highest in over two months against principal currencies on Tuesday. This surge is driven by market anticipation that the Federal Reserve will implement only modest rate cuts in the near future.

Recent U.S. economic data reflected a resilient economy, leading to a slight inflation increase in September. This has resulted in traders adjusting their expectations, reducing bets on drastic rate cuts by the Fed. Consequently, the dollar has gained strength. Notably, a shift in market speculation towards a slower rate-cut pace became evident after the Fed's aggressive 50 basis-point move in September.

As the dollar index reads 103.19, just below Monday's high of 103.36, influential figures, including Fed Governor Chris Waller, have emphasized caution in the interest rate cut approach, bolstering the dollar further. Meanwhile, the euro and the pound have shown decline, with market dynamics pushing Japan's yen near 150 per dollar amidst local economic changes.

(With inputs from agencies.)