Dollar Slips as Fed Hike Bets Cool; Yen Surprisingly Gains on Weak Japan GDP

The US dollar has experienced a decline against major currencies due to reduced expectations for further Federal Reserve rate hikes, according to recent market data.

This shift in investor sentiment was triggered by softer-than-expected US economic data and cautious comments from Fed officials, which suggests the central bank may be nearing the end of its tightening cycle.

The dollar index fell 0.2% to 103.50 in early European trading, while investors are now pricing in a roughly 70% chance that the Fed will hold rates steady at its next meeting in March, up from around 50% a week ago.

In contrast, the Japanese yen managed to gain ground despite weak Japan GDP data showing the economy contracted more than expected in the fourth quarter. Analysts attributed this resilience to short-covering and expectations that the Bank of Japan might still adjust its yield curve control policy in the coming months.