Dollar declines as markets brace for a Fed rate cut-Currency Recap

[Currency and Exchange Stock Chart for Finance and Economy Display]
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The U.S. Dollar (DXY [https://seekingalpha.com/symbol/DXY]) fell on Tuesday, extending its mild decline from overnight, pressured by increased odds of a Fed rate cut after the two-day meeting on Wednesday.

The greenback was last down 0.25%, at $97.06.

DOLLAR WEEKLY MOVES AND KEY DRIVERS:

The U.S. Dollar Index (DXY [https://seekingalpha.com/symbol/DXY]), which measures the value of the dollar against a basket of six foreign currencies, declined 0.22% over the last week.

[https://static.seekingalpha.com/uploads/2025/9/16/saupload_Screenshot_2025-09-16_130520.png]

The dollar was pressured by increasing conviction that the Fed is going to cut rates soon.

Markets are currently pricing in a 99.7% chance of a 25 basis point cut, with only a 0.3% chance of a 50 bps cut, the CME FedWatch tool showed.

Despite firm bets of a rate cut, investors are still waiting to hear from Fed Chair Jerome Powell, who has remained largely noncommittal towards any future easing.

In another turn of events, the Senate voted to confirm Stephen Miran [https://seekingalpha.com/news/4495107-trump-nominee-stephen-miran-fed-governor-senate-vote], Trump's top economic adviser, to the Federal Reserve's Board of Governors.

Lawmakers voted 48-47 to approve the confirmation of Miran, who will fill the seat that Adriana Kugler stepped down from last month.

He will be the first sitting White House official to serve on the Fed's board since 1935. This has raised concerns over potential political interference.

Meanwhile, a federal appeals court on Monday evening ruled 2-1 [https://seekingalpha.com/news/4495079-appeals-court-deals-trump-second-loss-attempt-oust-fed-governor-lisa-cook] that President Trump cannot remove Federal Reserve Board Governor Lisa Cook from her position.

The ruling means that Cook will also be allowed to participate and vote in the crucial Fed meeting, which will involve discussion on a potential interest rate cut.

The 10-year Treasury yield (US10Y [https://seekingalpha.com/symbol/US10Y#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link%7Cfirst_level_url%3Anews]) fell one basis point to 4.04% over the week, while the 2-year yield (US2Y [https://seekingalpha.com/symbol/US2Y#hasComeFromMpArticle=false#source=section%3Amain_content%7Cbutton%3Abody_link%7Cfirst_level_url%3Anews]) rose three basis points to 3.54%.

CURRENCY HIGHLIGHTS: MAJOR CURRENCY MOVEMENTS (SEPTEMBER 8 TO SEPTEMBER 15)

Euro (EUR:USD [https://seekingalpha.com/symbol/EUR:USD])

+0.14%

Pound Sterling (GBP:USD [https://seekingalpha.com/symbol/GBP:USD])

+0.42%

Japanese Yen (JPY:USD [https://seekingalpha.com/symbol/JPY:USD])

+0.29%

Chinese Yuan (CNY:USD [https://seekingalpha.com/symbol/CNY:USD])

+0.05%

Swiss Franc (CHF:USD [https://seekingalpha.com/symbol/CHF:USD])

-0.12%

Australian Dollar (AUD:USD [https://seekingalpha.com/symbol/AUD:USD])

+1.05%

Canadian Dollar (CAD:USD [https://seekingalpha.com/symbol/CAD:USD])

+0.25%

The euro (EUR:USD [https://seekingalpha.com/symbol/EUR:USD]) climbed toward $1.18, its strongest level since early July, buoyed by weakness in the U.S. dollar.

The Japanese yen (JPY:USD [https://seekingalpha.com/symbol/JPY:USD]) was last up 0.23%. The Bank of Japan is set to meet this Friday and is expected to leave rates unchanged around 0.5%.

Meanwhile, the Chinese yuan (CNY:USD [https://seekingalpha.com/symbol/CNY:USD]) was last up 0.09%.

MARKET REACTIONS AND ANALYSIS:

According to Brian Belski, chief investment strategist at BMO Capital Markets, the Federal Reserve’s anticipated shift toward cutting interest rates could extend the U.S. bull market [https://seekingalpha.com/news/4494665-fed-rate-cuts-likely-to-support-u-s-equities-but-with-muted-gains-bmo-s-belski], though future equity returns may be less robust than historical averages.

In a Sept. 11 note to clients, Belski highlighted that since 1982, the Standard & Poor’s 500 stock index has posted positive returns in eight out of 10 cycles following an initial or resumed rate cut, averaging gains of about 10.4% over the subsequent year.

Dollar-Based ETFs: (UUP [https://seekingalpha.com/symbol/UUP]), (USDU [https://seekingalpha.com/symbol/USDU]), and (UDN [https://seekingalpha.com/symbol/UDN]).

MORE ON U.S. DOLLAR

* The Dollar Is Softer To Start The New Week [https://seekingalpha.com/article/4822932-dollar-softer-to-start-new-week]
* Week Ahead: Federal Reserve And Bank Of Canada To Cut, While BOJ And BOE Stand Pat [https://seekingalpha.com/article/4822774-week-ahead-federal-reserve-and-bank-of-canada-to-cut-while-boj-and-boe-stand-pat]
* Markets Weekly Outlook - S&P 500, Nasdaq And Dow Jones On A Tear As Fed Rate Cut Looms [https://seekingalpha.com/article/4822661-markets-weekly-outlook-sp-500-nasdaq-dow-jones-on-tear-as-fed-rate-cut-looms]
* Appeals court deals Trump second loss in attempt to oust Fed Governor Lisa Cook [https://seekingalpha.com/news/4495079-appeals-court-deals-trump-second-loss-attempt-oust-fed-governor-lisa-cook]
* The next big investing theme of the 2020s is B.I.G. - BofA [https://seekingalpha.com/news/4494678-the-next-big-investing-theme-of-the-2020s-is-big---bofa]