By Daniel Takieddine CEO MENA at BDSwiss

The US dollar continued to see limited movements for a second day in a row as traders considered the dovish stance of the Federal Reserve on one side and more hawkish comments from some of its members on the other. However, interest rate cuts are still expected to begin in March next year which could drive yields lower and could weigh on the US currency over the medium to long term.

While the euro could continue to climb against the US dollar over the short term, the currency could be facing some risks if the monetary policy in the euro area shifts as traders expect interest rate cuts next year as well. Inflation in the region continued to decline as anticipated and could help the ECB move toward a softer stance in particular as the area faces difficult economic conditions.

The Japanese yen fell sharply against other major currencies as traders reacted to the Bank of Japan’s decision to maintain its interest rates unchanged. The Japanese central bank has also refrained from providing guidance on an expected change in monetary policy. As a result, the yen could be exposed to significant losses after it was able to recover from a low in November.