Dollar is near the highest level in a month as interest rate cut bets decline

The dollar maintained its position near a one-month high against major currencies on Thursday, supported by robust US retail sales data that reinforced expectations of a more measured approach to interest rate cuts by the Federal Reserve.

The dollar index, gauging the greenback against a basket of six major currencies, slightly declined to 103.29 in Asian trading after reaching 103.69 on Wednesday, its highest level since December 13.

Data from CME Fed Watch indicated a reduction in the likelihood of the Federal Reserve cutting interest rates in March, dropping to 61% from 65.1% on Tuesday. Despite this adjustment, the market is still pricing in potential cuts of 150 basis points by the end of the year.

The dollar reached 148.525 yen overnight, marking its highest level since the end of November. However, it slipped 0.08% in the latest intraday trading to 148.04 yen.

The euro rose by 0.09% to $1.08915, rebounding from a five-week low of $1.08445 recorded on Wednesday. The recovery was supported by comments from European Central Bank President Christine Lagarde, who suggested that there could be majority support among ECB officials for interest rate cuts in the summer, contrary to market expectations of a cut in the spring.

The British pound stabilized at $1.26815 after a rise on Wednesday fueled by unexpected acceleration in inflation data for December. The positive inflation figures reinforced expectations that the Bank of England might take a more cautious approach to interest rate cuts compared to other central banks.

The Australian dollar settled at $0.65545, recovering from earlier losses to $0.65255. The rebound followed data showing an unexpected decline in employment in December, fueling beliefs that interest rates in Australia may have peaked.