The U.S. dollar ticked modestly higher in early Thursday trading, though overall volumes were subdued due to the Thanksgiving holiday. Despite the small lift, the currency remains on track for its steepest weekly drop since July as markets reassess the Federal Reserve’s policy direction.
At 04:49 ET (09:49 GMT), the U.S. dollar index — which measures the greenback against major peers — edged up 0.1% to 99.69.
Traders continued to digest reports suggesting that White House economic adviser Kevin Hassett has emerged as the leading candidate to take over from Jerome Powell at the Federal Reserve. Analysts noted that Hassett’s preference for aggressive rate cuts could act as a drag on the dollar going forward.
Hassett is viewed as a long-standing ally of President Donald Trump, who has repeatedly criticized the central bank and urged Powell to deliver faster, deeper reductions in borrowing costs to stimulate the economy.
While policymakers within the Fed appear divided, markets remain confident that another 25-basis-point cut will be delivered at December’s meeting. The move would follow two similar reductions in September and October and reflects the Fed’s recent shift toward prioritizing labor market weakness over persistent inflation risks.
CME’s FedWatch tool now shows an 85% likelihood of a quarter-point cut on December 9–10 — more than doubling from roughly 39% a week earlier.
In a note, ING strategists including Francesco Pesole wrote: “The dollar remains somewhat expensive against G10 currencies, but given the size of this week’s correction and limited room for further dovish repricing before some more data comes in, we are switching to a neutral bias on [the dollar] for this Thanksgiving holiday.”
The euro slipped 0.2% to $1.1580 as investors monitored developments in peace negotiations between Ukraine and Russia, which could offer some support to the common currency.
A senior U.S. envoy is scheduled to visit Russia next week, though media reports indicate the Kremlin is unlikely to offer major concessions in any potential settlement with Kyiv.
In Asia, the yen gained 0.1% against the dollar as bets increased that the Bank of Japan could lift interest rates as early as next month. The move comes after the yen hit its weakest level in ten months last week.