The index that measures the US dollar is seen maintaining its prolonged decline as the market takes a cautious approach ahead of next week's FOMC meeting.
At 10 am, the US Dollar Index (DXY) was at 99.233 points, down 0.09% since it opened early Wednesday in Asian trading.
The USD's decline throughout the year continues to be the main factor limiting the attempt to rise, although some traders have started to close short positions to reduce risk ahead of several important market events in the coming weeks.
Expectations of the Fed's move continue to move the market. Traders are now setting a chance of around 87% for a 25 basis point rate cut in December, up from around 63% a month ago after New York Fed President John Williams said monetary policy was currently accommodative, signaling room for a move towards neutral rates.
Expectations of lower rates typically weigh on the dollar as they reduce the relative returns of US assets, weakening the DXY as optimism about easing increases.
Fiscal uncertainty has also added to the pressure. The $4.1 trillion US tax package, tariff uncertainty, and questions about the Fed's independence have dampened foreign interest in US assets, reducing inflows that typically support the dollar.
Treasury yields have also shown significant divergence. The 2-year yield nears 3.53% continues to decline on bets on a near-term rate cut, while the 10-year yield is around 4.10% and the 30-year nears 4.75%, reflecting lingering longer-term concerns about inflation and fiscal pressures.
Attention now turns to the ADP jobs report for November, due out tonight (Wednesday), for an update on labor market conditions.
