SINGAPORE: The dollar was heading for its worst weekly performance since late July on Friday as traders ramped up bets for further U.S. monetary easing next month, while an outage at CME Group halted trading in a number of currency pairs on its platform.
The CME disruption further reduced liquidity already thinned by the Thanksgiving holiday in the U.S.
The dollar index, which measures the greenback's strength against a basket of six major peers, was up 0.1% at 99.599, recovering some ground after five days of decline pushed it to its biggest one-week loss since July 21.
"With thinner trades due to the U.S. Thanksgiving holiday, FX volatility has eased," analysts from DBS wrote in a research note.
U.S. Fed funds futures are pricing an implied 87% probability of a 25-basis-point cut at the Federal Reserve's next policy meeting on December 10, compared with a 39% chance a week earlier, the CME Group's FedWatch tool showed.
The yield on the U.S. 10-year Treasury bond was up 1.3 basis point at 3.9998%, rebounding after five down days.
In Asia, the Japanese yen fluctuated between gains and losses against a backdrop of persistent weakness in the currency that has led to the prospect of intervention from the Ministry of Finance. It was fetching 156.33 yen as the labour market, and inflation data firmed up the case for monetary easing in Asia's second-biggest economy.
The yen is on track for a third month of decline as Prime Minister Sanae Takaichi sets out a 21.3 trillion yen ($135.40 billion) stimulus package, while the Bank of Japan has held off hiking interest rates even as inflation runs above target.
"I'm struggling to look for any real direction now to be honest," said Bart Wakabayashi, Tokyo branch manager at State Street.
"Dollar-yen is really, really tricky at the moment," he said, citing statements and policy announcements from Takaichi, the geopolitical spat with China, contradictory trends in economic data, and the threat of intervention.
The currency had briefly edged higher on news that consumer prices in Tokyo rose at a slightly faster-than-expected 2.8% rate in November.
"With the labour market still tight and inflation excluding fresh food and energy set to remain above 3% for now, the Bank of Japan will resume its tightening cycle over the next couple of months," analysts from Capital Economics wrote in a research report. "The upshot is that the case for tighter monetary policy remains intact."
The euro slipped 0.1% to $1.1582 as Ukraine's President Volodymyr Zelenskiy on Thursday said Ukrainian and U.S. delegations are to meet this week to work out a formula discussed at talks in Geneva to end war with Russia and provide security guarantees for Kyiv.
Sterling was 0.1% weaker at $1.3232, heading for its best weekly performance since early August, after Britain's finance minister, Rachel Reeves, revealed plans to raise taxes by 26 billion pounds ($34 billion) on Wednesday.
The Australian dollar fetched $0.6536, weakening 0.1%, while the kiwi slipped 0.2% to $0.5725 at the end of its biggest one-week surge since late April, after the nation's central bank on Wednesday virtually shut the door on any further rate cuts. The offshore yuan was at 7.072 yuan per U.S. dollar, steady in Asian trade and on track for its best monthly performance since August. - Reuters
