Dollar Holds Firm as Traders Await U.S.-China Trade Deal and BOJ Decision

The U.S. dollar held steady near a two-week high on Thursday as traders scaled back expectations of another Federal Reserve rate cut this year and awaited the outcome of a meeting between U.S. President Donald Trump and China’s President Xi Jinping. Optimism surrounding a potential trade agreement lifted market sentiment, even as the highly anticipated talks concluded without major surprises. Trump said a deal could be signed soon, while Xi confirmed that both nations had reached a “basic consensus.”

The dollar index hovered around 99.025, buoyed by investor hopes for improved U.S.-China relations. The euro inched up 0.13% to $1.1616 after slipping 0.43% the previous day, while the British pound remained weak near a five-and-a-half-month low at $1.3204.

On Wednesday, the Federal Reserve cut interest rates by 25 basis points and announced it would end its balance sheet reduction on December 1. However, Fed Chair Jerome Powell signaled caution, citing internal policy divisions and limited data due to the ongoing government shutdown. Analysts at Commonwealth Bank of Australia noted that while a December rate cut is still possible, Powell’s comments suggest it could be delayed into 2026. Market expectations for another quarter-point cut in December have fallen to around 68%, down from nearly full pricing before the Fed’s meeting.

Attention also turned to the Bank of Japan’s policy announcement, where rates are expected to remain unchanged. The yen hovered near an eight-month low at 152.46 per dollar and an all-time low of 177.12 against the euro. Investors are closely watching how Japan’s new Prime Minister Sanae Takaichi’s pro-loose policy stance might influence the BOJ’s next moves.

Elsewhere, the Australian and New Zealand dollars rose, supported by a stronger yuan, which reached a near one-year high at 7.0955 per dollar amid renewed Sino-U.S. trade optimism.