The US dollar is seen declining for the week, and is likely to decline further. This is because the market is increasingly confident that the Federal Reserve will ease policy further, amid political pressure from President Trump to cut rates. In an atmosphere of thin liquidity due to the Thanksgiving holiday in the US, currency movements have become larger than usual.
The Japanese yen strengthened slightly, driven by a more hawkish tone from the Bank of Japan, thus raising speculation that the Japanese government may take the opportunity to intervene in the dollar/yen market. At the same time, the US dollar index has moved away from a six-month high and analysts such as UBS have begun to recommend shifting some exposure from the US dollar to currencies such as the euro and Australian dollar.
In Europe, the euro and Swiss franc are driven by geopolitical developments, especially negotiations that could lead to a potential peace agreement in Ukraine. The prospect of a conflict resolution is seen as supporting the euro but at the same time reducing demand for the Swiss franc as a safe haven.
The New Zealand and Australian dollars performed stronger after their respective central banks signaled that their rate-cutting cycles may be ending, supported by warm inflation data and high bond yields.
