Dollar Decline Amid Speculation on Rate Cuts and Leadership Changes

The dollar index fell, nearing a five-week low ahead of a key U.S. inflation report. Investors are anticipating a Federal Reserve rate cut despite the inflation reading. Speculation grows around Kevin Hassett potentially becoming Fed Chair, which could influence a more dovish monetary policy. Major economic data releases remain delayed.

The dollar index experienced a drop on Friday, hovering near a five-week low as investors awaited a significant U.S. inflation report expected to reinforce expectations of a Federal Reserve interest rate cut next week. The yen strengthened against the dollar amid speculation of a rate hike by the Bank of Japan.

Measuring the dollar against six major currencies, the index fell 0.05% to 99.029, edging close to Thursday's five-week low of 98.765. The PCE deflator, a preferred Fed inflation measure, is set for release later on Friday but unlikely to alter the forecast of a quarter-point rate cut in the upcoming Federal Open Market Committee meeting.

Investors also considered White House economic adviser Kevin Hassett as a potential successor to Fed Chair Jerome Powell, further fueling expectations of increased policy easing. Meanwhile, delayed U.S. economic data due to a prolonged government shutdown complicates market predictions, with key labor statistics postponed until mid-December.