The U.S. dollar fell to a one-week low against other major currencies on Wednesday, extending a three-day slide from a weekly peak as the market caught its breath after a frenzied rally following the election of Donald Trump as U.S. president.
The overnight support for the dollar and other traditional safe-haven currencies such as the yen was short-lived, after Russia's foreign minister said Moscow would do everything possible to avoid a nuclear war, hours after Russia said it would ease the conditions for launching a nuclear strike.
Bitcoin hit a fresh high above $94,000, buoyed by expectations of a more crypto-friendly regulatory environment under Trump.
The dollar index, which measures the greenback's performance against six major currencies including the yen and the euro, fell to a low of 106.07 for the first time since Wednesday last week, and was at 106.18 at 0247 GMT.
The index rose to a one-year high of 107.07 on Thursday, supported by expectations of heavy fiscal spending, higher tariffs and tighter immigration laws under the incoming U.S. administration, measures that economists say could boost inflation and possibly slow the pace of the Federal Reserve's monetary easing policy.
Investors are awaiting Trump's choice for Treasury Secretary, after several other important appointments were announced, including Howard Lutnick's choice for Commerce Secretary.
Some of Trump's nominees have sparked controversy because of their relatively little experience in the field.
“Trump-backed trades that have boosted the dollar are facing challenges from Trump’s controversial cabinet nominations and an escalation in the Russia-Ukraine war,” DBS analysts wrote in a note to clients.
They added that for the dollar in the longer term, more weight should be given to strong economic data and the increasing likelihood that the Federal Reserve will have to slow its rate-cutting path further in 2025.
Traders continue to trim their expectations for a rate cut at the Fed’s next meeting in December. The odds are now at 57.3 percent, down from 58.7 percent the day before, according to the CME Group’s FedWatch tool. The odds were at 76.8 percent a month ago.
Federal Reserve Chairman Jerome Powell said last week that the economy is not sending any signals that we need to rush to cut interest rates, after a series of strong economic indicators.
The dollar rose 0.9 percent to 154.84 yen after falling sharply to 153.28 on Tuesday after the news from Russia.
The euro was steady at $1.0598 after recovering from a low of $1.0524 in the previous session.
Bitcoin settled at $91,954 after earlier rising to a record high of $94,078.22.
The Financial Times reported that Trump's social media company is in talks to buy cryptocurrency exchange Bakkt, raising hopes of a crypto-friendly ecosystem under his watch.
