Dollar Slips as Weak U.S. Manufacturing Data Increases Pressure for Fed Rate Cuts

The U.S. dollar extended its decline on Tuesday as disappointing manufacturing data intensified expectations that the Federal Reserve will cut interest rates at its upcoming policy meeting. The U.S. dollar index fell to 99.408 at the start of Asian trading, retreating for a seventh straight session and touching a two-week low as global stocks and bonds weakened.

Fresh data from the Institute for Supply Management showed U.S. manufacturing contracted for the ninth consecutive month in November, with the PMI slipping to 48.2 from 48.7. New orders and employment indicators also softened, while input prices rose amid ongoing pressure from import tariffs. According to Brian Martin, head of G3 economics at ANZ, the data underscores slowing economic demand. He noted that the Fed may need not only to cut rates in December but to continue easing next year, projecting an additional 50 basis points of reductions in 2026.

Market sentiment reflects those expectations. Fed funds futures now signal an 88% probability of a 25-basis-point rate cut on December 10, up sharply from 63% a month earlier, based on CME Group’s FedWatch tool. Meanwhile, the 10-year U.S. Treasury yield edged higher to 4.086% following Monday’s global bond selloff.

In currency markets, the dollar traded steady at 155.51 yen after Bank of Japan Governor Kazuo Ueda suggested the central bank may weigh a rate hike at its next meeting, pushing Japan’s two-year yields above 1% for the first time since 2008. The euro held firm at $1.1610 as diplomatic efforts to end the war in Ukraine gained momentum, while sterling hovered near a one-month high at $1.3216 following the resignation of Britain’s fiscal watchdog chief after an accidental budget leak. The Australian dollar traded at $0.6544 and the New Zealand dollar at $0.5727, both little changed in early Asian trading.