Dollar Index Dips Amid Fed Rate Cut Speculations

The dollar index weakened, nearing a five-week low as market expectations remained that the Federal Reserve will cut interest rates. Speculation intensified with potential dovish moves under Kevin Hassett as possible new Fed Chair. Economic indicators, however, including labor data, remain somewhat skewed and incomplete due to a recent government shutdown.

The dollar index saw a decline on Friday, hovering near a five-week low. This downturn comes amid speculation of an impending interest rate cut by the U.S. Federal Reserve, with markets anxiously awaiting a key inflation report.

Against the yen, the dollar hit a near three-week low as investors anticipate a potential rate hike from the Bank of Japan later this month. Despite these movements, traders have priced in an 86% chance that the Federal Reserve will cut rates next week.

The economic backdrop remains complex with skewed labor market data due to the recent government shutdown. Meanwhile, investors closely watch developments around the potential appointment of economic adviser Kevin Hassett as the new Fed Chair.

(With inputs from agencies.)