The US dollar languished at multi-week lows versus major peers on Thursday as traders ramped up bets for the Federal Reserve to resume reducing interest rates next month.
The greenback fared worst against the yen after US Treasury Secretary Scott Bessent suggested the Bank of Japan needs to hike rates again soon, while the Fed cuts aggressively.
Rising expectations for monetary easing combined with increasing institutional cryptocurrency investment powered bitcoin to a fresh record peak.
That was a different story than the US, where Fed rhetoric has turned broadly more dovish on signs of a cooling labour market, while President Donald Trump’s tariffs are yet to add to price pressures in a significant way.
Traders see a Fed rate cut on September 17 as a near certainty, according to LSEG data, and even lay around 7 percent odds on a super-sized half-point reduction.
“For the markets, it’s not even a matter of if the Fed cuts interest rates in September, it’s a question of how much,” said Kyle Rodda, an analyst at Capital.com.
“Signs of a downturn in the labour market have pushed futures to bake in a series of rate cuts before the end of the year.”
The Fed also continues to be under intense political pressure to ease.
Trump has repeatedly criticised Fed Chair Jerome Powell for not cutting rates sooner, even threatening to oust him before Powell’s term expires in May.
Treasury Secretary Scott Bessent on Wednesday called for a “series of rate cuts,” and said the Fed could kick off the policy easing with a half-point cut.
Bessent also said the BOJ had gotten “behind the curve” by delaying rate hikes.
“Bessent’s comments are having a strong impact on USDJPY,” said Norihiro Yamaguchi, an economist at Oxford Economics.
At the same time, “gains in the yen are being accelerated by low liquidity in the market as fewer market participants are around this week” due to the Obon holiday, he said.
