U.S. Dollar Rebounds as Investors Await Clarity on Trump’s Policies

The U.S. dollar rose from a one-week low on Wednesday, while the Japanese yen weakened, as investors shifted focus from geopolitical tensions to awaiting clarity on U.S. President-elect Donald Trump’s policy direction. The dollar index gained 0.3%, reaching 106.42, after a brief slide, as traders recalibrated their expectations surrounding Trump’s economic policies. This recovery came after concerns over the Russia-Ukraine situation had momentarily increased market uncertainty.

Meanwhile, the Japanese yen dropped to 155.67 against the U.S. dollar, reversing earlier gains. The yen’s fall raised concerns over potential intervention by the Bank of Japan if the currency weakens further, as it had in the summer months. Despite these worries, Russia’s assurance to avoid escalating the conflict in Ukraine helped to ease some of the immediate market fears.

Investors are continuing to watch for more concrete details on Trump’s policies, especially his choice for Treasury Secretary, as his administration’s fiscal spending, tariff increases, and trade strategies are expected to influence the dollar. These developments, which have been dubbed the “Trump Trade,” are expected to remain key drivers for the currency. In the meantime, the probability of a Federal Reserve rate cut in December has softened, with market expectations now at 59.1%, down from 82.5% last week, according to CME’s FedWatch Tool.

Other currencies also saw movement, with the British pound briefly strengthening after UK inflation data exceeded expectations, suggesting the Bank of England may adopt a more gradual approach to interest rate cuts. The euro slipped by 0.3%, trading at $1.056, while Bitcoin climbed towards its all-time high of $94,000, supported by hopes for a crypto-friendly regulatory environment under Trump.

Overall, the outlook for the U.S. dollar remains uncertain, with traders awaiting more signals from Trump’s administration and the Federal Reserve’s upcoming economic decisions, which will play a pivotal role in shaping the market’s next move.

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