Dollar buffered by Trump policy expectations; bitcoin surges

The dollar steadied on Thursday as traders awaited more clarity on U.S. President-elect Donald Trump's proposed policies amid an uncertain outlook for interest rates, while bitcoin forged towards $100,000 for the first time.

Bitcoin BTCUSD has been on a blistering rally in the past few weeks on speculation that Trump will create an easier regulatory environment for cryptocurrencies.

It hit a record high of $97,902 on Thursday, underpinned by a report Trump's social media company was in talks to buy crypto trading firm Bakkt BKKT. It was last up 2.75% at $97,070.

The dollar index DXY was steady at 106.55, and not far off last week's one-year high of 107.07.

"The U.S. is still the main driver, really. It feels a bit of a risk-off morning. The yen is the main winner so far, and I think that's this week, with Ukraine at front and centre at the moment," IG chief strategist Chris Beauchamp said, referring to an escalation in the conflict between Ukraine and Russia.

The euro EURUSD, one of the main casualties of the dollar's post-election ascent, was down another 0.1% at $1.053275.

European leaders and policymakers are already grappling with the potential ramifications of Trump's proposed tariff hikes, while political uncertainty in the region's largest economies - Germany and France - is adding to that mix.

French far-right leader Marine Le Pen on Wednesday threatened to seek to topple Prime Minister Michel Barnier's fragile coalition government if her National Rally (RN) party's cost-of-living concerns were not incorporated into the 2025 budget.

"There are enough things to be concerned about to just tilt people towards being more cautious at the moment," Beauchamp said.

The seemingly unstoppable dollar has been helped by sharp swings in expectations for U.S. interest rates. The market currently sees just a 54% chance of a cut from the Federal Reserve next month, down from 82.5% only a week ago, according to CME's FedWatch Tool.

A Reuters poll showed most economists expect the Fed to cut rates at its December meeting, with shallower cuts in 2025 than expected a month ago due to the risk of higher inflation from Trump's policies.

TRUMP BUMP

The dollar has rallied more than 2% since the Nov. 5 U.S. presidential election, driven by an expectation that Trump's proposals on raising trade tariffs and cutting taxes could reignite inflation and limit the Fed's ability to cut rates.

At the same time, traders are sizing up what Trump's campaign pledges of tariffs mean for the rest of the world, with Europe and China both likely in the firing line.

"Right now, we are kind of stuck in a wait-and-worry zone because Trump is in the midst of forming his cabinet," said Moh Siong Sim, currency strategist at Bank of Singapore.

"There's a lot of things that are missing there in terms of understanding," including the timing and magnitude of policies, and those details won't be known for a couple of months or so, he said.

Elsewhere, Ukraine fired a volley of British Storm Shadow cruise missiles into Russia on Wednesday, the latest new Western weapon it has been permitted to use on Russian targets, a day after it fired U.S. ATACMS missiles.

With geopolitical tensions running high, the Japanese yen USDJPY has outperformed. The dollar was last down 0.6% on the day at 154.52 yen.

The yen has lost around 10% in value in the last couple of months, as traders have bet heavily in favour of the dollar, given the chances that U.S. rates will remain well above Japanese ones for some time.

Bank of Japan Governor Kazuo Ueda said on Thursday the central bank would "seriously" take into account foreign exchange rate moves in compiling its economic and price forecasts.

He noted that there was still a month to go until the BOJ's next policy meeting in December, adding that there would be more information to digest by then.