Euro Hits Seven-Week High: What This Currency Shift Means for Investors and Businesses in Oman
LONDON – The US dollar remained steady near a five-week low following subdued US economic data, which appeared to reinforce expectations of a Federal Reserve rate cut next week. This development offered relief to the Japanese yen and propelled the euro to nearly a seven-week peak.
Market participants are also considering the possibility of White House economic adviser Kevin Hassett succeeding Jerome Powell as Fed Chair when Powell’s term concludes in May. Hassett is anticipated to advocate for additional rate reductions.
US President Donald Trump announced this week that he will reveal his nominee to replace Powell early next year, prolonging the selection process despite earlier assertions that he had already made a decision. Analysts suggest that appointing Hassett might weaken the dollar, as bond investors have voiced concerns to the US Treasury about Hassett potentially implementing aggressive rate cuts to align with Trump’s preferences, according to the Financial Times.
Data from LSEG indicates traders are pricing in an 85% likelihood of a 0.25 percentage point rate cut next week.
“A Fed rate cut next week is already priced in,” stated Commerzbank FX analysts Thu Lan Nguyen and Antje Praefcke. “What will be crucial for the dollar, however, is whether there will be new signals about the direction of monetary policy in upcoming meetings.”
The dollar index, which tracks the US currency against six others, was virtually unchanged at 98.94 after a nine-day decline. It hovers near a five-week low and has dropped nearly 9% year-to-date.
A Reuters survey revealed that while a significant minority of foreign exchange strategists foresee the dollar strengthening next year, the majority still predict a weaker dollar in 2026 due to expectations of rate cuts.
Thomas Mathews, head of markets for the Asia-Pacific region at Capital Economics, commented that despite next week’s potential cut, investors might be overestimating the extent of mid-term Fed easing, given the US economy’s strength. “That, I think, will keep the dollar from falling too far,” he said.
The technology sector leads the S&P 500 this year, rising 33% as enthusiasm around AI drives gains in major firms like Alphabet and Meta.
The euro declined marginally by less than 0.1% to $1.1657 but remained near its highest level since October 17, buoyed by data showing eurozone business activity expanding at its fastest rate in 30 months this November. The euro has surged over 12% this year, on track for its largest annual gain since 2017. Its rise reflects both a weaker dollar—impacted earlier by tariff concerns—and growing odds of US rate cuts.
The European Central Bank, scheduled to meet in two weeks, is widely expected to maintain current rates, with markets assigning only about a 25% chance of easing next year.
The Japanese yen held steady at 155.22 per dollar, slightly recovering from a 10-month low reached last month amid renewed fears of intervention by Tokyo authorities. Reuters reported that the Bank of Japan is likely to raise rates in December, according to three government sources, though the bank’s subsequent actions remain uncertain.
Chidu Narayanan, Wells Fargo’s head of macro strategy for APAC, noted, “A still cautious BOJ, attractive carry for long dollar/yen positions, and sustained upward pressure on Japanese government bond yields from potential fiscal expansion are likely to maintain yen weakness.”
Sterling stood at $1.3337, close to its highest level since October 28, while the Swedish krona declined against both the euro and dollar after inflation slowed in November.
China’s yuan weakened slightly but stayed near a 14-month high after the central bank set a weaker-than-expected official midpoint for the sixth consecutive day, signaling caution over rapid appreciation. Despite challenges including trade tensions, slow growth, record-low interest rates, and a drop in foreign investment, the yuan is on track for its best performance since the pandemic year of 2020. — Reuters
Special Analysis by Omanet | Navigate Oman’s Market
The anticipated US Federal Reserve rate cut and potential leadership change signal a weaker US dollar ahead, which could benefit Omani businesses reliant on dollar-denominated imports and attract more foreign investment due to improved regional currency stability. However, entrepreneurs should be vigilant about currency fluctuations, especially with the yen and euro strengthening, and consider hedging strategies to mitigate exchange rate risks. Smart investors might explore opportunities in sectors positively impacted by global monetary easing and rising tech advancements, while monitoring geopolitical influences on currency markets.
