Dollar rallies on Fed outlook, yen weakens

23 Oct 2024 , 10:03 AM

As investors shifted their expectations towards a gradual drop of interest rates while watching a close presidential election contest, the U.S. dollar lingered at a peak of two and a half months on Wednesday.

The release of the Fed’s Beige Book review of economic conditions is the main event on Wednesday’s otherwise weak economic data agenda.

The yen fell to its lowest level in three months as the dollar and U.S. Treasury yields continued to rise.

Treasury yields have been supported by the Fed’s less dovish view. Tuesday’s 4.222% yield on the benchmark 10-year note was the highest since July 26.

After a barrage of positive economic data, the expectation of fast rate hikes from the Federal Reserve has subsided, and the dollar has been rising for three weeks.

According to the CME FedWatch tool, the market now has a 91% likelihood of pricing in a mild quarter-basis-point decrease in November. Investors were divided between wagers for 50 basis points a month prior.

The dollar index, which compares the value of the US dollar to six other currencies, crept up to 104.19, its highest level since August 2, and was last up 0.11% at 104.18. So far this month, the index has increased by over 3%.

Investors have been assessing the possibility of a Republican sweep, which is generally regarded as the most optimistic election scenario for the next few weeks, as the presidential race approaches its conclusion.

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