Fed rate cuts and doubts over independence to keep US dollar under pressure

BENGALURU – The US dollar will weaken over coming months as market participants ponder the Federal Reserve’s future independence and how many more rate cuts it may deliver, a Reuters survey of foreign exchange strategists showed on Wednesday.

The greenback, down nearly 10% against a basket of major currencies this year, has been the worst performer among them. The short-dollar trade has dominated FX markets since late March, according to Commodity Futures Trading Commission data.

Worries about the inflationary impact of tariffs, an enormous tax cut and spending law and repeated White House attempts to interfere with the world’s most powerful central bank have reversed the dollar’s fortunes after a multi-year run of strength.

A weaker dollar trend will likely persist in the near-term as interest rate futures show markets fully pricing in two Fed cuts this year and possibly another in early 2026.

Nearly 80% of respondents, 39 of 50, said net-short bets would either rise further by end-September or remain around current levels, according to the August 29-September 3 Reuters poll.

The remaining 11 said short bets would decrease. No one chose “a reversal to net-longs.”

“A big risk is the fact everybody seems to think the dollar is likely to weaken, which means that positioning is all one way. That’s sometimes a factor that should make us a little bit more wary,” said Jane Foley, head of FX strategy at Rabobank.

“If we get a lot of inflationary news from the US, there certainly would be room for pullbacks in favor of the dollar.”

FX strategists in Reuters polls, who have broadly accurately predicted the dollar’s slide this year, forecast the euro EUR=, currently USD 1.17, to climb steadily to a median USD 1.18 and USD 1.19 in three and six months respectively.

It was then predicted to trade at USD 1.20 in a year: the highest survey median since September 2021.

In the meantime, US President Donald Trump’s repeated pressure on Chair Jerome Powell to slash rates to 1% and his efforts to oust Fed Governor Lisa Cook over mortgage fraud allegations are testing the boundaries of presidential power.

Trump’s Fed board nominee Stephen Miran, chair of the Council of Economic Advisers, has called for sharply lower rates, argued tariffs have little inflationary impact, and proposed Fed governance reforms that would give the president greater control, including the power to dismiss its leadership at will.

“The dollar will face some pressure to soften into the end of the year and it’s going to be a function of two things: one, a resumption of the Fed’s rate-cutting cycle and second, the market’s questions with regard to the Fed’s independence,” said Paul Mackel, head of FX research at HSBC.

(Reporting by Sarupya Ganguly; Polling by Shaloo Shrivastava and Jaiganesh Mahesh; Editing by Hari Kishan, Ross Finley, and Nick Zieminski)

Safe-haven gold rally gains further momentum after soft US data

Gold extended its record-breaking rally on Wednesday, powered by softer US jobs data that reinforced expectations of a Federal Reserve interest rate cut later this month, while lingering global uncertainties kept safe-haven demand firmly in play.

Spot gold was up 1.2% to USD 3,576.59 per ounce by 2:25 p.m. EDT (1825 GMT), after hitting a record high of USD 3,578.50.

US gold futures gained 1.2% to USD 3,635.50.

The US government reported that job openings fell more than expected in July and hiring was moderate, consistent with easing labor market conditions.

Gold was already trading in record territory before the release of the data, and the softer numbers helped buoy the precious metal, with the next upside target eyed at USD 3,600 an ounce, said Fawad Razaqzada, a market analyst at City Index and FOREX.com.

Following the data, traders boosted the probability that the US central bank would cut rates by 25 basis points at its September 16-17 policy meeting to 98%, up from 92% earlier, according to CME Group’s FedWatch tool.

Investors’ focus now shifts to US jobless claims and ADP employment data on Thursday and the closely-watched monthly nonfarm payrolls report on Friday.

Fed Governor Christopher Waller on Wednesday repeated his call for a rate cut this month, and said how fast the central bank lowers borrowing costs after that meeting will depend on what happens next in the economy.

Fed Governor Lisa Cook, meanwhile, laid out in greater detail on Tuesday her opposition to President Donald Trump’s bid to remove her from office. Trump has repeatedly criticized Fed Chair Jerome Powell for not cutting rates this year.

“Growing concerns over the independence of the US central bank are further undermining trust in dollar-denominated assets and pushing investors toward gold,” traders at Heraeus Metals said. USD/

Trump is set to ask the US Supreme Court to validate the legality of his broad import tariffs after two setbacks in lower courts.

Elsewhere, the euro zone economy kept expanding at a snail’s pace in August.

Bullion tends to gain traction during uncertain times and a low-interest rate backdrop.

“Gold’s rally has room to run, with short-to-medium-term targets around USD 3,600 to USD 3,800, and the breakout pattern suggesting USD 4,000 could be within reach by late first quarter next year,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.

Riding the wave of gold’s rally, spot silver rose 1.1% to USD 41.34, its highest level since September 2011.

Platinum gained 2.2% to USD 1,434.17 and palladium was up 1.8% to USD 1,155.05.

(Reporting by Ashitha Shivaprasad, Sherin Elizabeth, and Anushree Mukherjee in Bengaluru; Editing by Joe Bavier, Paul Simao, and Cynthia Osterman)

Nasdaq, S&P 500 end higher with Alphabet, Apple, rate-cut hopes; Dow dips

NEW YORK – The Nasdaq rose 1% and the S&P 500 also ended higher on Wednesday as Alphabet jumped after a US judge ruled against breaking up the Google parent and as investors were optimistic that the Federal Reserve would cut interest rates this month.

The Dow finished slightly lower, with shares of Boeing down 2.1%.

Alphabet and Apple gave the S&P 500 and Nasdaq their biggest boosts. Shares of Alphabet rose 9.1% after the late Tuesday ruling, which allows Google to retain control of its Chrome browser and Android mobile operating system, while barring certain exclusive contracts with device makers and browser developers.

Shares of Apple gained 3.8% as the ruling also preserved lucrative payments to the iPhone maker from Google.

“Google and Apple got a lifeline … They won the sweepstakes,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. “The courts just cemented their reputation.”

Several Fed officials said labor market concerns continue to animate their belief that rate cuts lie ahead. Fed Governor Christopher Waller said he thinks the central bank should be cutting at its next meeting. Atlanta Fed President Raphael Bostic reiterated his view that a rate cut is in the cards, although he did not say how soon it might happen.

Data earlier showed US job openings fell in July, suggesting a softening labor market.

The Dow Jones Industrial Average fell 24.58 points, or 0.05%, to 45,271.23, the S&P 500 gained 32.72 points, or 0.51%, to 6,448.26 and the Nasdaq Composite gained 218.10 points, or 1.03%, to 21,497.73.

September is historically a weak month for the stock market. But Peter Cardillo, chief market economist at Spartan Capital Securities in New York, said he did not think the month would be “as trying as it usually is because of the fact that the Fed is expected to lower rates.”

US rate futures now widely expect the Fed to lower rates this month, pricing in a 96% chance of a 25 basis point cut at the end of the two-day Fed policy meeting on September 17, according to the CME Group’s FedWatch tool.

Investors were still anxious to see Friday’s monthly jobs report.

Shares of Macy’s jumped 20.7% after the company raised its annual forecasts. On the flip side, discount retailer Dollar Tree DLTR.O shares fell 8.4% after the company forecast current-quarter profit below estimates, with tariffs seen driving up costs for the retailer.

With the second-quarter US earnings season now at its end, investors are paying close attention to estimates for third-quarter results and possible impacts from President Donald Trump’s tariff war.

Advancing issues outnumbered decliners by a 1.33-to-1 ratio on the NYSE. There were 224 new highs and 45 new lows on the NYSE.

On the Nasdaq, 2,259 stocks rose and 2,337 fell as declining issues outnumbered advancers by a 1.03-to-1 ratio.

Volume on US exchanges was 14.95 billion shares, compared with the 16.18 billion average for the full session over the last 20 trading days.

(Additional reporting by Purvi Agarwal and Ragini Mathur in Bengaluru; Editing by Devika Syamnath and David Gregorio)

Anxious Wall Street braces for jumbo ‘September effect’: McGeever

ORLANDO, Florida – Data going back decades shows that, on average, September is the worst month for US stocks – and by a considerable margin. So should investors brace for another bumpy ride this year? Almost certainly, and not just because of the “September effect.”

If the market saying “Sell in May and go away” had any validity, September would be a bumper month, with investors returning from their summer holidays eager to buy back stocks that, presumably, had become cheaper since Memorial Day.

But history suggests the opposite.

Since 1950, the S&P 500’s average return in the month of September is -0.68%, according to Carson Group’s Ryan Detrick. If you round to one decimal place, September is the only month with an average negative return in the last 75 years.

And there have been more “down” than “up” Septembers over this period. The S&P 500 has only posted positive returns in September 44% of the time since 1950, the lowest positivity rate for any calendar month and the only one below 50%.

And the performance appears to be getting worse. In the last decade, the S&P 500’s average September return has been near -2%.

TOTAL OUTLIER

There is no obvious explanation for those seasonal factors.

Some analysts point to the looming fiscal year-end, as fund managers may seek to dump their worst-performing stocks. Others say tax-related selling is a factor, again because fund managers are shedding their losing positions, this time to limit or offset capital gains.

Investor psychology could also be at play. Investors, having experienced decades of lousy Septembers, may return from their summer holidays expecting a tough month. This caution can turn into pessimism, which can lead to selling, resulting in a self-fulfilling prophecy.

However dubious these explanations may be, the numbers don’t lie. For much of the last century, September has been the cruelest month for global equity investors.

EYES WIDE OPEN

The stage is set for a particularly rocky September this year.

Wall Street’s main indexes are at or near record highs, valuations are getting stretched, especially in the tech sector, and market concentration has never been greater.

True, momentum appears to be on the bulls’ side. The S&P 500 and Nasdaq have been up for four and five consecutive months, respectively. And as the second quarter earnings season wraps up, nearly 80% of companies have reported profit and revenue above analysts’ estimates, compared with long-term averages of 67% and 62%, respectively, according to LSEG data.

On top of that, investors can likely expect a Federal Reserve rate cut on September 17, if rates futures market pricing is accurate.

But all of that is already “in the price,” to use traders’ parlance. And Wall Street’s momentum is slowing as monthly gains have steadily diminished over the summer, especially for the Nasdaq, which rose 1.6% in August compared with 9.6% in May.

What happens next will likely largely depend – like most things in markets this year – on what happens in the technology sector. Tech stocks are by some valuation metrics the most expensive they have been since the dotcom bubble burst 25 years ago.

Investors appear to have noticed, as they have recently started rotating out of tech and into cheaper small caps. Given the record-high market concentration in this sector, a continuation of this trend could weigh heavily on the broader market.

So this September could be volatile, at the very least. Past results are no guarantee of future performance, of course. But caution is warranted. As Porter Collins, co-founder of Seawolf Capital, recently posted on X, when markets are this extended, an “eyes wide open approach” is advisable. With so many potential catalysts for a correction looming this September, investors would be wise not to look away.

(The opinions expressed here are those of the author, a columnist for Reuters)

(By Jamie McGeever; Editing by Tomasz Janowski)

Wall Street ends lower as ruling on Trump tariffs raises concerns

NEW YORK – Wall Street started off September on a sharply lower note on Tuesday as investors weighed the future of President Donald Trump’s tariffs after a federal appeals court ruled most of his sweeping tariffs illegal.

A divided US appeals court made the ruling on Friday, but allowed for the levies to be in place until October 14. Trump on Tuesday said his administration will ask the Supreme Court for an expedited ruling on the tariffs.

The appeals court ruling rattled investors after the long Labor Day holiday weekend, with September traditionally a weak month for equities. The Cboe Volatility Index – Wall Street’s fear gauge – rose, but the major stock indexes ended off their worst levels of the day.

With the ruling, “the question becomes, ‘Has the Trump administration alienated our trading partners as well as given up the revenue from tariffs?’ That’s what’s plaguing markets,” said Oliver Pursche, senior vice president and adviser for Wealthspire Advisors in Westport, Connecticut.

“By the same token, it’s too early to call this the beginning of a great correction,” he said. “At the end of the day, we all know that August-September tend to be more volatile and a little more challenging for investors before we get into the fourth quarter, which tends to be a pretty solid one.”

Data going back decades shows that, on average, September is the worst month for US stocks, and some investors are bracing for another bumpy ride this year.

In addition, investors are anxious to see the monthly US payrolls report, due on Friday, and whether weak US job growth continued for a fourth month in August.

The Dow Jones Industrial Average fell 249.07 points, or 0.55%, to 45,295.81, the S&P 500 fell 44.72 points, or 0.69%, to 6,415.54 and the Nasdaq Composite fell 175.92 points, or 0.82%, to 21,279.63.

US rate futures widely expect the Federal Reserve to lower interest rates this month, pricing in a 92% chance of a 25-basis-point cut at the end of its two-day policy meeting on September 17, according to CME Group’s FedWatch.

Real estate fell 1.7% and had among the biggest S&P 500 sector declines on the day, with US 30-year Treasury yields on Tuesday climbing to their highest levels since mid-July.

Also, shares of Kraft Heinz dropped 7% after the company said it will split into two companies, one focused on groceries and the other on sauces and spreads.

On the flip side, shares of PepsiCo gained 1.1% after Elliott Management disclosed a USD 4 billion stake in the beverages company, launching an activist campaign.

On the Nasdaq, 1,555 stocks rose and 3,099 fell as declining issues outnumbered advancers by about a 1.99-to-1 ratio There were 105 new highs and 118 new lows.

On the NYSE declining issues outnumbered advancing ones by a 2.4-to-1 ratio . There were 176 new highs and 53 new lows.

Volume on US exchanges was 16.41 billion shares, compared with the 16.26 billion average for the full session over the last 20 trading days.

(Reporting by Caroline Valetkevitch in New York; Additional reporting by Purvi Agarwal and Ragini Mathur in Bengaluru; Editing by Pooja Desai, Maju Samuel, and Matthew Lewis)

Gold’s record-breaking rally: who’s keeping it going?

LONDON – Gold prices hit a record USD 3,532 per troy ounce on Tuesday, extending a rally that has boosted them more than 90% since late 2022. Demand is expected to remain robust for some time due to a mix of factors.

Central bank purchases and strong investment demand, visible in inflows into physically backed gold exchange-traded funds, are the main drivers, fuelled by US President Donald Trump’s upending of Western security policy, his trade wars with other countries, and concerns about the independence of the US Federal Reserve.

WILL CENTRAL BANKS KEEP ON BUYING MORE?

Annual net purchases of gold by central banks have exceeded 1,000 metric tons each year since 2022, according to consultancy Metals Focus, which expects them to buy 900 tons this year – twice the annual average of 457 tons in 2016-2021.

Developing countries are seeking to diversify from the dollar after Western sanctions froze roughly half of Russia’s official foreign currency reserves in 2022.

Official numbers reported to the International Monetary Fund reflect only 34% of the 2024 total central bank gold demand estimate, according to the World Gold Council, an industry body.

They have contributed 23% to total annual gold demand in 2022-2025, double the average share recorded during the 2010s.

WILL THE DROP IN THE JEWELLERY SECTOR CONTINUE?

Demand for gold for jewelry, the main source of physical demand, fell 14% to 341 tons in the second quarter of 2025, the lowest since the pandemic-swept third quarter of 2020, as high prices deterred buyers, according to the WGC.

High prices spurred the decline, the bulk of which came from the largest markets – China and India – whose combined market share fell below 50% for only the third time in the last five years, the WGC estimated.

Metals Focus estimated that gold jewellery fabrication fell 9% to 2,011 tons in 2024 and will deliver a 16% slump this year.

ARE PEOPLE STILL BUYING SMALL GOLD BARS AND COINS?

There has been a major shift in appetite for different products in the retail investment market but total purchases in this sector remain robust.

Investment demand for gold bars rose 10% in 2024, while coin buying fell 31%, according to the WGC, which said the trend has extended to this year.

Metals Focus expects net physical investment to rise 2% this year to 1,218 tons as demand in Asia remains high amid positive price expectations.

CAN GOLD ETFs ATTRACT MORE INFLOWS?

Gold ETFs have become a more important source of demand for gold this year, recording inflow of 397 tons in the period from January to June, their largest first half inflow since 2020, according to the WGC.

Gold ETFs total holdings stood at 3,615.9 tons at the end of June, the largest since August 2022. Their record was 3,915 tons five years ago.

Metals Focus expects net investment in ETPs in 2025 at 500 tons after seven tons of outflows in 2024.

(Reporting by Polina Devitt; Editing by Nia Williams)

Two-year yields heading for largest monthly drop in a year

US Treasuries were mixed on Friday and interest rate-sensitive two-year yields were on track for their largest monthly drop in a year as traders squared positions ahead of Monday’s Labor Day holiday and after inflation data for July met economists’ expectations.

The Personal Consumption Expenditures (PCE) Price Index increased 0.2% last month after an unrevised 0.3% rise in June, data on Friday showed. Excluding the volatile food and energy components, the PCE Price Index increased 0.3% last month, matching the rise in June.

The data keeps the Federal Reserve on track to cut rates at its September 16-17 meeting.

“You can check this off as one more risk to potentially derailing a cut in September. The inflation part of it, at least in this measure, is not going to do anything to reduce odds of a cut in September,” said Michael Lorizio, head of US rates trading at Manulife Investment Management in Boston.

Fed funds futures traders are now pricing in 89% odds of a cut next month, up from 84% before the data.

US consumer spending increased by the most in four months last month. A separate report from the University of Michigan showed consumers’ one-year inflation expectations jumped to 4.8% in August from 4.5% in July.

Traders ramped up bets on more cuts after Fed Chair Jerome Powell last Friday adopted an unexpectedly dovish tone and said that risks to the job market were rising.

Efforts by President Donald Trump to fire Fed Governor Lisa Cook have raised the prospect that Trump could make more dovish appointments to the US central bank that would result in easier policy.

A court hearing on Trump’s attempt to fire Cook ended on Friday with no immediate ruling from the judge, meaning that Cook will remain in place for now.

Longer-dated yields edged higher on Friday as traders closed positions ahead of the long weekend and repositioned for month-end.

Some interest rate hedging was also likely influencing the market with corporate debt markets expected to pick up next week when many people return from summer vacations.

“We have a very busy week coming up … with primary markets and all the spread product markets returning in full force, especially the corporate bond market,” said Lorizio.

Jobs data for August is also due next Friday, which may be key in determining near-term Fed policy.

The 2-year note yield was last down 1.6 basis points on the day at 3.619%. It has fallen 33 basis points this month, the most since last August.

The yield on benchmark US 10-year notes rose 1.6 basis points to 4.223%.

The yield curve between two-year and 10-year notes was last at 60 basis points. It has steepened by 18 basis points this month, the most since April.

(Reporting by Karen Brettell; Editing by Nick Zieminski and Leslie Adler)

Oil prices fall with expected low demand, upcoming supply boost

HOUSTON – Oil prices fell on Friday as traders looked toward weaker demand in the US, the world’s largest oil market, and a boost in supply this autumn from OPEC and its allies.

Brent crude futures for October delivery, which expired on Friday, settled at USD 68.12 a barrel, down 50 cents, or 0.73%. The more active contract for November finished down 53 cents, or 0.78%, at USD 67.45.

West Texas Intermediate crude futures settled at USD 64.01, down 59 cents, or 0.91%.

The market was in part shifting its focus toward next week’s OPEC+ meeting, said Tamas Varga, analyst at PVM Oil Associates.

Crude output has increased from the Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, as the group has accelerated output hikes to regain market share, raising the supply outlook and weighing on global oil prices.

“Overall, the bottom line is we’re going to see a jump in supply feeding into a lackluster demand market,” said Andrew Lipow, president of Lipow Oil Associates.

The US summer driving season ends on Monday’s Labor Day holiday, signalling the end of the highest demand period in the United States, which is the largest fuel market.

“The market is beginning to wonder what effect the tariffs might have on the economic outlook next year,” Lipow said, referring to tariffs imposed by the administration of President Donald Trump on US imports from many trading partners.

Crude supply increases have not made their way into the US market yet, raising the possibility supply and demand will be in a tighter balance, said Phil Flynn, senior analyst with Price Futures Group.

“The pessimism about demand, I’m just not seeing it,” Flynn said. “Supply from OPEC is supposed to increase, but we’re not seeing it in the US I think things are going to stay tight.”

Prices rose earlier in the week due to Ukrainian attacks on Russian oil export terminals, but reports of talks between Ukraine’s European allies about a possible ceasefire helped tamp down prices, Flynn said.

US crude inventories for the week ending August 22 showed higher-than-expected draws, implying late-summer demand was still firm, particularly in industrial and freight-related sectors, analyst Ole Hvalbye at SEB bank said in a note.

Investors are also watching for India’s response to pressure from the United States to stop buying Russian oil, after Trump doubled tariffs on imports from India to as much as 50% on Wednesday.

So far, India has defied the US and Russian oil exports to India are set to rise in September, traders said.

“The prevalent view is that Russian sanctions are not forthcoming, and India will ignore US sanction threats and continue buying Russian crude oil at heavily discounted prices,” PVM’s Varga said.

(Reporting by Erwin Seba in Houston, Seher Dareen in London, Yuka Obayashi, and Sudarshan Varadhan; Editing by Kirsten Donovan, Jan Harvey, Nia Williams, and Diane Craft)

US markets present a double concentration risk

NEW YORK – The world’s most important market is worryingly unbalanced. Last week, shares of technology companies that feature in the S&P 500 Index fell a collective 1.6%. That might seem a small tremor, if not for the fact that the seven largest of them account for roughly a third of the broader benchmark’s value. With mom-and-pop investors and sophisticated creditors increasingly exposed, the fortunes of the many will fall ever more on the shoulders of the few.

As of mid-August, the so-called Magnificent Seven—Apple, Microsoft, Nvidia, Amazon.com, Meta Platforms, Alphabet, and Tesla — made up about 34% of the S&P 500’s value, a new record. Add Broadcom, Berkshire Hathaway, and JPMorgan Chase, and that figure nears 40%. During the heady dot-com era, the largest 10 companies claimed a peak share of only 23%. The standard, blue-chip index for gaining exposure to broad US corporate strength is becoming a concentrated bet on artificial intelligence.

Meanwhile, household wealth is more tied to this top-heavy market than ever. Equities represent about 43% of Americans’ assets, the largest share on record, according to Federal Reserve data. Retail investors now account for roughly 18% of equity trading volume, nearly double the level a decade ago, according to JPMorgan Chase. Most of these flows funnel into index funds, among which S&P 500 trackers are the most popular.

Derivatives magnify those ties. Average daily trading for S&P 500 index options is around 3.7 million contracts per day, according to exchange operator CBOE Global Markets. Since each contract represents 100-times the index level, the total daily notional value is about USD 2.4 trillion, well above the value of individual company stocks traded. This immense leverage amplifies market movements by creating larger swings in the underlying index from relatively small options moves.

Ordinary day-traders aren’t the only ones snared in Big Tech’s relentless rise. Credit investors are also tied to what happens on the West coast: Microsoft, Amazon, and Meta raised over USD 60 billion in investment-grade debt over the past year to fund AI projects, becoming the largest weights in corporate bond indices. These markets are just as responsive to bad news as their equity counterparts. Following Washington’s tariff announcements in April, the premium investors demanded to hold Big Tech debt over US government bonds rose alongside falling share prices. An AI slowdown could easily translate into substantial debt-market stress.

Of course, today’s titans are no dot-com pretenders. They are cash-rich and highly profitable, the very strengths that vaulted them into global portfolios and Americans’ savings in the first place. The risk is not that they collapse. It is that even minor setbacks now threaten enormous consequences.

CONTEXT NEWS

A sell-off in the stocks of large US technology companies has pressured the benchmark S&P 500 Index. For the week of August 17, index constituents in the technology sector fell 1.6%, even after comments from Federal Reserve Chairman Jerome Powell suggesting potential rate cuts prompted a broader rally on August 22.

(Editing by Jonathan Guilford; Production by Maya Nandhini)

Dollar headed for monthly drop on rate cut wagers

SINGAPORE – The dollar wobbled on Friday, poised for a 2% drop in August against major currencies on rising odds of the Federal Reserve cutting interest rates next month while worries about the threats to the US central bank’s independence linger.

President Donald Trump’s campaign to exert more influence over monetary policy, including attempts to fire Lisa Cook, one of the Fed’s governors, has weighed on the dollar. Cook filed a lawsuit claiming Trump has no power to remove her from office.

The legal battle is the latest chapter in Trump’s attempts to reshape the central bank after repeatedly criticizing the Fed and its Chair Jerome Powell for not cutting interest rates.

Currency markets started Friday tentatively, with the euro little changed at USD 1.1675, on course for a 2% gain in August. Sterling last bought USD 1.3509, and the Japanese yen fetched 146.97 per dollar.

The Australian dollar was steady at USD 0.6533, set for a 1.6% gain in the month.

The dollar index, which measures the US currency against six major peers, was at 97.917, on course for a 2% decline in the month. The index is down nearly 10% this year as erratic US trade policies drove investors towards alternative assets.

“While President Trump may be able to lower the Fed Funds rate by influencing the makeup of the interest rate setting committee, longer-term interest rates may not respond in kind,” said Carol Kong, currency strategist at Commonwealth Bank of Australia.

“If markets perceive the FOMC’s independence as compromised, inflation expectations could become unanchored, driving long term interest rates higher.”

Trump’s push to place hand-picked, dovish-leaning candidates on the central bank’s decision-making committee has pressured short-term yields lower, while the longer term yields have risen.

A politically influenced Fed that keeps interest rates lower than they otherwise might could result in higher inflation and reduce foreign demand for the debt due to credibility fears, while a worsening fiscal outlook is also expected to weigh on longer-dated bonds.

The yield curve between two-year and 10-year notes was last at 57 basis points, after hitting their steepest level since April earlier in the week.

Still, market reaction to the battle between Trump and the Fed’s Cook has been relatively muted with slight dollar selling and curve steepening.

“The market is looking through the amplified theatre and noise with regard to the robust opinions circulating regarding the independence of the US Fed,” said George Boubouras, head of research at K2 Asset Management.

“The market is not complacent about these developments, it is simply being pragmatic.”

RATE CUT WAGERS

Federal Reserve Governor Christopher Waller said on Thursday he wants to start cutting rates next month and “fully expects” more rate cuts to follow to bring the Fed’s policy rate closer to a neutral setting.

Markets are currently pricing in an 86% chance of a rate cut in September, up from 63% a month earlier, CME FedWatch showed. Traders are wagering on over 100 basis points of easing by June next year.

Data on Thursday showed the US economy grew faster than initially thought in the second quarter, but tariffs on imports continued to cloud the picture.

Investors will parse through the PCE price index report, the Fed’s preferred inflation measure, later on Friday. On a year-over-year basis, headline PCE inflation is estimated at 2.6%, after rising at the same rate in June.

While a reading of 3% or higher will raise eyebrows after the Fed’s dovish pivot, the key data remains next Friday’s labour market report ahead of the September FOMC meeting, said Tony Sycamore, market analyst at IG.

(Reporting by Ankur Banerjee in Singapore; Editing by Shri Navaratnam)

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