**USD Steadies Amid South Korea’s Rate Cut; Yen Rises on Rate Hike Expectations**

SINGAPORE (Reuters) – The U.S. dollar maintained a steady position on Thursday, buoyed by a surprising interest rate cut from South Korea’s central bank, while the Japanese yen marked its most significant weekly gain in three months as expectations for a potential rate hike in Japan grow.

Throughout the Asian trading session, the yen experienced a slight decline, trading at 151.59 per dollar. However, it has appreciated 2.4% this week, rebounding from losses incurred following the U.S. elections. Market analysts estimate a 55% likelihood that the Bank of Japan could implement a rate hike as early as next month.

“Recent stronger-than-expected inflation data from Japan, alongside the possibility of the Federal Reserve cutting rates in December, have contributed to the downward pressure on the dollar-yen pair,” stated Jane Foley, a senior currency strategist at Rabobank, in her briefing to clients.

Meanwhile, the South Korean won also faced some weakness. Traders noted that authorities have intervened to stabilize the won after the Bank of Korea made its second consecutive rate cut, a move that only four out of 38 economists in a Reuters poll had predicted.

In Europe, the euro was holding at $1.0553 after experiencing its sharpest rise in four months on Wednesday. This rally followed comments from Isabel Schnabel, a member of the European Central Bank’s board, who indicated that any future rate reductions should be gradual. Her remarks led to a decline in market expectations for rate cuts, prompting increased demand for the euro.

Quek Ser Leang, a strategist at UOB in Singapore, commented, “The fading downward momentum suggests a possible rebound, with targets potentially reaching $1.0650.”

Traders will be paying close attention to upcoming inflation data from Germany, which could serve as the next critical influence on market movement, while concerns about the stability of France’s coalition government continue to loom over the euro region.

**MARKET ACTIVITY IN A HOLIDAY LULL**

The overall trading environment was subdued due to the U.S. Thanksgiving holiday. However, there were notable developments in the emerging markets. The Mexican peso appreciated nearly 1% following statements from former President Donald Trump about a deal with Mexico’s president, Claudia Sheinbaum, regarding migration – an issue linked to tariffs Trump has proposed.

The Russian rouble moved back under 110 per dollar, buoyed by the central bank’s announcement that it would cease foreign currency purchases until year-end to provide support for the rouble.

Conversely, Brazil’s real plummeted to an all-time low as the market reacted negatively to concerns over budget deficits resulting from proposed tax cuts, while ten-year bond yields surged by 38.5 basis points.

In the U.S., a drop in overnight yields exerted downward pressure on the dollar following data showing personal consumption expenditures met expectations with a modest 0.2% monthly rise. As a result, the dollar index saw a slight increase, standing at 106.24.

The British pound gained ground against the dollar, trading at $1.26, while the New Zealand dollar remained resilient after Wednesday’s 50-basis point rate cut by the Reserve Bank of New Zealand, which was less aggressive than many anticipated.

The Australian dollar, however, edged down 0.2% to $0.6480 ahead of a key speech by Reserve Bank of Australia Governor Michele Bullock. Analysts are keenly awaiting insights on how the RBA plans to navigate inflation concerns, a topic expected to be approached with caution, according to strategist Peter Dragicevich from Corpay.

As traders prepare for the upcoming trading sessions, keeping an eye on central bank communications and inflation reports will be critical to navigating potential volatility in currency markets.

Image from Reuters via Free Malaysia Today, licensed under CC BY 4.0.