Finance
Dollar slips as traders eye next week's Fed meeting
Published by Global Banking & Finance Review®
Posted on December 8, 2025
3 min readLast updated: January 20, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on December 8, 2025
3 min readLast updated: January 20, 2026
The U.S. dollar fell as traders await the Federal Reserve meeting, expecting a rate cut. The yen rose on potential BOJ rate hikes, while global central banks prepare for key decisions.
By Saqib Iqbal Ahmed
NEW YORK, Dec 5 (Reuters) - The U.S. dollar slipped on Friday but held within recent ranges against major currencies as traders awaited next week's Federal Reserve meeting, where policymakers are widely expected to cut interest rates.
The dollar index, which measures the currency against six peers, was down 0.1% at 98.994, not far from Thursday's five-week low of 98.765. For the week, the index was down 0.5%.
The euro was about flat at $1.16433, not far from Thursday's three-week high of $1.1681.
Traders are pricing a nearly 90% chance of a Fed rate cut next week, and potentially two more reductions next year, LSEG data showed.
"This week, some soft labor market data releases from alternative sources helped crystallize what still appears to be an overdone 90% probability of a cut next week," Antonio Ruggiero, FX & macro strategist at Convera, said.
Morgan Stanley said on Friday it now expects the Fed to deliver a quarter-percentage point rate cut in December, joining peers JPMorgan and BofA Global Research, following dovish remarks from central bank policymakers.
All three brokerages previously expected the Fed to hold rates steady in December.
"The dollar also continues to look overvalued relative to major peers, with the softer tone therefore fully justified," Ruggiero said.
Data on Friday that showed U.S. consumer sentiment improved in early December did little to boost the dollar.
Separately, the Personal Consumption Expenditures (PCE) Price Index increased 0.3% in September after gaining 0.3% in August, the BEA said. Excluding the volatile food and energy components, the PCE Price Index gained 0.2% after climbing 0.2% in August, the report delayed by the recent government shutdown showed.
Investors are also weighing the prospect of White House economic adviser Kevin Hassett taking over as Fed chair after Jerome Powell’s term ends in May. Hassett is expected to push for more rate cuts.
The dollar "remains slightly offered on the view that the Fed will cut rates next week and that the arrival of Kevin Hassett as Fed Chair will somehow make the Fed more dovish," said Chris Turner, global head of markets at ING.
YEN FIRMS
The yen, which has been supported in recent sessions by expectations that the Bank of Japan could raise rates this month, edged up on Friday, rising 0.1% to 155.295 to the dollar.
BOJ officials are ready to raise rates on December 19 in the absence of any major economic shocks, Bloomberg reported on Friday, a day after Reuters reported three sources as saying a hike this month was likely.
"As the funding currency of choice in the carry trade, some unwinding in light of higher JPY rates is poised to boost the yen," Convera's Ruggiero said.
Sterling was about flat on the day at $1.3329, not far from the previous session's six-week peak of $1.3385.
Next week sees a parade of central bank policy decisions, with the Reserve Bank of Australia's coming on Tuesday, the Bank of Canada's on Wednesday and the Swiss National Bank's on Thursday in addition to the Fed's statement on Wednesday.
That continues the following week with the BOJ, European Central Bank, Bank of England, and Sweden's Riksbank.
Leading cryptocurrency bitcoin fell for the second straight day, slipping 3% to $89,701.
(Reporting by Saqib IqbAl Ahmed in New York, Joice Alves in London and Kevin Buckland in TokyoEditing by Mark Potter, Peter Graff and Diane Craft)
The U.S. dollar index measures the value of the U.S. dollar relative to a basket of foreign currencies. It reflects the dollar's strength or weakness in the global market.
Interest rates are the cost of borrowing money, expressed as a percentage of the total loan amount. They are set by central banks and influence economic activity.
Foreign exchange, or forex, is the global market for trading national currencies against one another. It is the largest financial market in the world.
A central bank is a national institution that manages a country's currency, money supply, and interest rates. It oversees the banking system and implements monetary policy.
Cryptocurrency is a digital or virtual currency that uses cryptography for security. It operates on decentralized networks based on blockchain technology.
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