The dollar index (DXY00) on Wednesday rose by +0.24%. The dollar moved higher on Wednesday due to weakness in GBP/USD after UK November consumer prices rose less than expected. Also, weakness in the yen on Wednesday was positive for the dollar as Japanese fiscal concerns weigh on the yen. In addition, Wednesday’s stock market slump boosted liquidity demand for the dollar. The dollar fell back from its best level on dovish comments from Fed Governor Waller, who said the Fed can keep cutting rates as interest rates are still 50-100 bp above neutral.
The dollar is also under pressure as the Fed boosts liquidity in the financial system, having begun purchasing $40 billion a month in T-bills, effective last Friday. Finally, the dollar is also being undercut by concerns that President Trump intends to appoint a dovish Fed Chair, which would be bearish for the dollar. Mr. Trump recently said that he will announce his selection for the new Fed Chair in early 2026. Bloomberg reported that National Economic Council Director Kevin Hassett is the most likely choice as the next Fed Chair, seen by markets as the most dovish candidate.
