Dollar extends fall on Fed rate cut bets

The dollar index fell below 99.5 on Thursday, sliding for the fourth straight session to its lowest level in nearly two weeks, pressured by mounting expectations of further Federal Reserve rate cuts.

Markets now price in roughly an 85% chance of a 25 basis-point cut in December, a sharp jump from about 30% just a week ago, reflecting a swift shift in sentiment as investors increasingly bet on a more accommodative policy path.

Futures markets also suggest that three additional cuts could follow by the end of 2026, underscoring the depth of the pivot traders now anticipate.

Those expectations strengthened after reports that White House National Economic Council Director Kevin Hassett has emerged as the leading contender for the next Fed chair — a choice widely viewed as consistent with President Donald Trump's long-standing preference for lower interest rates.

The prospect of a more dovish leadership at the central bank added downward pressure on Treasury yields, further weighing on the dollar.

Meanwhile, data on Wednesday showed that initial jobless claims unexpectedly declined and durable goods orders surpassed forecasts, offering a mixed picture of the US economy.

While the strong data might typically support the dollar, investors appear more focused on policy direction than near-term economic surprises.

The greenback weakened against most major currencies, with the steepest declines seen versus the New Zealand and Australian dollars as risk sentiment improved.

Trading volume is expected to remain subdued through Friday due to the Thanksgiving holiday, which could exacerbate volatility in thin markets.