SINGAPORE/LONDON - The dollar held steady ‍on Tuesday ahead of an expected ‍rate cut from the Federal Reserve, while the Aussie dollar was firmer after its central bank ruled out more easing.

Markets are anticipating a rate cut from the Fed, and preparing ​for several more central bank decisions before the weekend.

"The Fed is tomorrow so market participants probably aren't really looking for repositioning ahead of this," said Michael Pfister, FX analyst at Commerzbank.

The U.S. dollar index, which measures the ⁠greenback's strength against a basket of six currencies, slipped 0.1% to 98.977.

Traders are also looking ahead to the U.S. NFIB's small business optimism index for November as well as the Job Openings and Labor Turnover Survey (JOLTS) for October ⁠due ‌later in the session.

Bond investors are dialling back expectations of rate cuts in 2026 as scepticism mounts that Kevin Hassett, the frontrunner to succeed Jerome Powell, whose eight-year term as Fed chair ends in May, will prove as dovish as hoped by U.S. President Donald Trump.

Nevertheless, markets believe policy easing from the U.S. central bank this week is a ⁠near-certainty, with attention turning to the outlook for the year ahead.

"When the statement is published everyone will be looking at the dot plot," said Pfister, FX analyst at Commerzbank, who pointed to increased divergence among policymakers.

"We are seeing decision makers with diverging views now," he said, adding that if the dot plots are lower than the last time, this will probably not be very helpful for the dollar.

Fed funds futures are pricing an implied 89.4% probability of a 25-basis-point cut at the Fed's two-day meeting starting on December 9, according to the CME Group's FedWatch tool.

The yield on the U.S. ⁠10-year Treasury bond was last trading at 4.1605%, down about 1 ​bps following a three-day rise in yields to the highest in almost three months.

"Markets made a dash for higher rates, and the new levels seem justified based on fundamentals," analysts from ING wrote in a research note.

Elsewhere, the euro rose, following ‍Monday's selloff in bund markets, after ECB board member Isabel Schnabel told Bloomberg News that the European Central Bank's next move may be an interest rate hike, rather than a cut as some expect, but added that it would not happen in the near ​future.

The European common currency was last trading up 0.1% at $1.1653.

 

AUSSIE DOLLAR GETS LIFT; QUAKE SHAKES YEN

The Australian dollar strengthened after the Reserve Bank of Australia kept rates on hold, as markets counted down to the U.S. Federal Reserve's policy meeting later this week.

The Australian currency advanced 0.3% to $0.6645 after the central bank held interest rates for a third consecutive month at 3.6%, as widely expected, and warned that a pickup in inflation could be persistent.

"The RBA didn't try to tamp down hawkish market expectations," said Sim Moh Siong, currency strategist at Bank of Singapore. "What was said in the meeting matches the market expectations that the RBA has tilted a bit more on the hawkish direction."

The currency extended gains as RBA Governor Michele Bullock said in a press conference that more rate cuts were not needed.

"The press conference made it clear that rate cuts are done now, and the next one could be a hike ... this was enough to boost the Australian dollar," said Commerzbank's Pfister.

The yen weakened slightly after initially strengthening in Asian trading after a powerful 7.5-magnitude earthquake struck Japan's northeast overnight, adding to the risk-averse mood ahead of the Fed meeting and expected policy decisions from several other central banks, while an auction of five-year government bonds attracted ⁠robust demand.

The yen was last 0.1% down against the U.S. dollar at 155.82 yen. It initially strengthened slightly after the ‌quake, which prompted evacuation orders and tsunami warnings that were downgraded to advisories hours later.

"The initial shock immediately revived memories of supply-chain fragility, potential insurance losses, and disruption to critical industrial output," said Tony Sycamore, market analyst at IG in Sydney, noting the anxiety was adding to the "risk-off tone" on markets

The Chinese yuan trading offshore in Hong Kong appreciated 0.1% to 7.0623 yuan against the dollar, as markets deemed the statement from the ‌latest Politburo meeting released on Monday ⁠indicated that policymakers showed little urgency to roll out additional stimulus measures.

The British pound was last 0.2% stronger at $1.33470, while the New Zealand dollar was up 0.3% at $0.57920. Cryptocurrencies sold off, with bitcoin last down 1.3% ⁠at $90,142.98 and ether= tumbling 1.4% to $3,104.70.