2024.01.0313:57:00UTC+00U.S. Dollar Advances As Yields Rise On Rate Uncertainty

The U.S. dollar firmed against its major counterparts in the New York session on Wednesday, amid fading optimism about early interest rate cuts by the Federal Reserve.

Risk-off mood prevailed in financial markets as doubts emerged over just when the Fed plan to begin trimming rates in 2024.

Treasury yields rallied ahead of the release of the minutes amid worries Fed officials will signal a more cautious approach to future rate decisions.

Ahead of the release of the minutes, Richmond Federal Reserve Tom Barkin said the U.S. economy heading for a soft landing is "increasingly conceivable but in no way inevitable."

"The airport is on the horizon. But landing a plane isn't easy, especially when the outlook is foggy, and headwinds and tailwinds can affect your course," Barkin said in prepared remarks to the Raleigh Chamber of Commerce: Launch 2024. "It's easy to oversteer and do too much or understeer and do too little."

Barkin also noted the U.S. economy continues to defy expectations, suggesting consumer spending is unlikely to pull back as long as equity values are high and the labor market remains tight.

"Longer-term rates have dropped recently, which could stimulate demand in interest-sensitive sectors like housing," Barkin said. "While you might think this would be a first-class problem, strong demand isn't the solution to above-target inflation. That's why the potential for additional rate hikes remains on the table."

The greenback advanced to fresh 2-week highs of 0.6227 against the kiwi and 0.6717 against the aussie, off its early lows of 0.6276 and 0.6770, respectively. The greenback is poised to find resistance around 0.60 against the kiwi and 0.64 against the aussie.

The greenback moved up to near 2-week highs of 143.06 against the yen and 1.3359 against the loonie, from its early lows of 141.85 and 1.3316, respectively. The greenback may find resistance around 148.00 against the yen and 1.36 against the loonie.

The greenback appreciated to an 8-day high of 0.8554 against the franc and more than a 2-week high of 1.0910 against the euro, reversing from its early lows of 0.8488 and 1.0965, respectively. The next possible resistance for the currency is seen around 0.91 against the franc and 1.06 against the euro.

The greenback recovered against the pound, with the pair trading at 1.2628. On the upside, 1.24 is possibly seen as its next resistance level.

Looking ahead, ISM manufacturing PMI for December will be released in the New York session.

The Fed minutes from the December 12-13 meeting will be published at 2 pm ET.