US dollar steady even with rate-cut speculation returning

The US dollar held steady on Tuesday as traders weighed the growing likelihood of a Federal Reserve rate cut next month following dovish remarks from policymakers. The yen, meanwhile, remained under pressure and on alert for potential intervention.

Fed Governor Christopher Waller said the labor market is weak enough to justify a quarter-point cut in December, though further action will depend on a wave of delayed economic data following the government shutdown. His comments echoed those of New York Fed President John Williams, prompting a sharp shift in market expectations. According to CME FedWatch, traders now assign an 81% probability to a December cut, up from 42% just a week ago.

The shift has exerted slight downward pressure on the dollar. The euro edged up to $1.1522, sterling traded at $1.3103, and the dollar index hovered around 100.2 in early trading.

Despite the growing bets on easing, Fed officials remain split on the path forward, with the central bank still awaiting key economic indicators delayed by the recently concluded 43-day shutdown. Signs of improving US-China relations also factored into broader market sentiment.