Grapevine

Dollar weak as traders add to wagers of big rate cut from Fed

The dollar softened on Friday, with the euro and the yen on the rise as investors remained on tenterhooks ahead of next week's central bank bonanza where the focus is on the Federal Reserve and the size of its expected interest rate cut.

While the Fed is all but certain to cut rates next week, uncertainty around whether it will go with a 25 basis point cut or 50 basis points has kept investors on the edge and weighed on the dollar.

Analysts pointed to media reports from the Financial Times and the Wall Street Journal suggesting the Fed's decision would be a close call as one of the reasons for traders adding to wagers of a big rate cut next week.

Traders are pricing in a 43% chance of the Fed cutting rates by 50 bps, up from 27% a day earlier, with a 57% probability of a 25 bps cut, CME FedWatch tool showed. Markets are pricing in 113 bps of easing from three remaining meetings this year.

The European Central Bank on Thursday lowered rates but ECB president Christine Lagarde dampened expectations for another cut next month, sending the euro higher, with the single currency holding onto those gains in early trading on Friday.