Published by Global Banking & Finance Review®
Posted on November 4, 2025
4 min readLast updated: January 21, 2026
Add as preferred source on GoogleThe dollar strengthens on rate cut doubts, while the pound declines due to UK economic challenges. Safe-haven currencies like the yen remain stable.
By Saqib Iqbal Ahmed
NEW YORK (Reuters) -The dollar rose to a four-month high against the euro on Tuesday as divisions in the Federal Reserve raised doubt about the prospect of another rate cut this year, while a risk-off move sent investors seeking the U.S. currency for safety.
Meanwhile, sterling fell after the UK finance minister pointed to "hard choices" in her upcoming budget.
Overall market sentiment was noticeably darker, with stocks falling and government bonds drawing demand, while safe-haven currencies like the yen and the Swiss franc held firm.
"I think it's just an old-fashioned haven bid," said Michael Brown, senior research strategist at Pepperstone, noting strength in both the dollar and the Japanese yen.
The euro fell for the fifth straight session, down 0.3% to $1.1483, its weakest since August 1. Against the yen, the dollar was 0.4% lower at 153.60 yen, though the Japanese currency remained near a recent 8-1/2-month low.
"Despite all the column inches that 'death of the dollar' takes up, it does remain the best haven out there in the minds of market participants," Brown said.
With investor risk appetite taking a hit, the Australian dollar fell 0.8% at $0.649, after the Reserve Bank of Australia left its cash rate steady as expected at 3.60% and said it was cautious about further easing.
Cryptocurrency bitcoin sank 7% to $99,679, dropping below the $100,000 level for the first time since June.
DIVIDED FED
Tuesday's dollar rise was an extension of the rally following last week's Fed meeting, where the central bank cut rates as expected but Chair Jerome Powell suggested another cut in December was not a given.
Since then, Fed officials have offered competing views of where the economy stands and the risks facing it in the absence of economic data suspended due to the U.S. government shutdown.
Traders now price a 65% chance of a rate cut in December, compared with 94% a week earlier, CME FedWatch showed.
That shift in near-term expectations has boosted the dollar. The dollar index, which measures the U.S. currency against six others, topped 100 for the first time since early August and was last at 100.17.
Still, some investors remain skeptical the dollar's recent strength marks a sustainable turnaround in the currency's longer-term outlook.
"Just as US growth numbers have been upgraded in recent months so have the European ones, leaving relative growth expectations significantly narrower than the start of 2025," George Saravelos, global head of FX research at Deutsche Bank, said in a note.
"This benign global growth environment is not consistent with a continued dollar rally," Saravelos said.
POUND POUNDED
Sterling fell 0.9% to $1.3015, after British finance minister Rachel Reeves set out the difficult economic backdrop she was wrestling with, pointing to high debt levels, low productivity and stubborn inflation.
"Reeves' remarks that her budget choices will focus on reducing inflation to prepare for rate cuts are likely to enliven the debate about a (Bank of England) move before year-end and will focus attention on this week’s BoE meeting," Rabobank head of currency strategy Jane Foley said in a note.
"We would expect the pound to remain on the back foot heading into the November 4 policy meeting given speculation of a dovish tilt."
YEN BOUNCE
The Bank of Japan's decision to leave interest rates unchanged last week has offered the yen some much-needed support.
Still, the yen's recent weakness prompted Finance Minister Satsuki Katayama to reiterate the government's intention to continue to monitor currency movements with a high sense of urgency.
The yen is approaching levels at which Japanese authorities intervened to support it in 2022 and 2024.
U.S. President Donald Trump, who visited Japan last week, has frequently criticised governments that allow their currencies to weaken, arguing that it gives them an unfair trade advantage. This might mean Katayama will tread carefully, analysts said.
(Reporting by Saqib Iqbal Ahmed; Additional reporting by Amanda Cooper in London, Ankur Banerjee in Singapore and Lucy Raitano in London; Editing by Kevin Liffey and Aurora Ellis)
The dollar index measures the value of the U.S. dollar against a basket of foreign currencies, indicating the dollar's strength in the global market.
A rate cut refers to a reduction in the interest rate set by a central bank, aimed at stimulating economic growth by making borrowing cheaper.
A safe-haven currency is a currency that investors flock to during times of economic uncertainty, as it is considered stable and reliable.
Sterling refers to the British pound, the official currency of the United Kingdom, often used as a benchmark for economic performance.
The Federal Reserve, often referred to as the Fed, is the central bank of the United States responsible for monetary policy and regulating financial institutions.
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