Dollar tries to find footing as recession worries simmer

The U.S. dollar clawed back some of the previous day’s declines on Thursday as investors weighed the outlook for Federal Reserve policy amid simmering fears that high interest rates could spur a recession, Reuters reported.
With Japan’s own long-term yields pegged near zero by the central bank, the yen slid as long-term U.S. Treasury yields clambored off three-month lows.
Meanwhile, the yuan hovered close to an almost three-month high after China revealed a loosening of stifling COVID restrictions.
The U.S. dollar index – which gauges the greenback versus six counterparts – ticked up 0.19% to 105.33 in the Asian session, bouncing after a 0.42% slide overnight, its first decline since Friday.
While investors have been anticipating the Fed will soon slow its tightening pace, recent upbeat U.S. employment, services and factory data have added to investor uncertainty over the policy outlook.
Money markets price 91% odds that the policy-setting Federal Open Market Committee will raise rates by half a point on Dec. 14, with just 9% probability for another 75 basis point increase. Rates are now seen peaking at just below 5% in May.
Fed policy makers will have the benefit of seeing the latest consumer inflation data a day before the decision.
“Uncertainty about the inflation outlook suggests the risk remains high that the FOMC will keep policy at a restrictive level for longer and in turn drag the economy into a deeper downturn,” Carol Kong, a strategist at Commonwealth Bank of Australia, wrote in a client note.
“The FOMC may step down the pace of its rate hikes to 50bp next week, but unless inflation decelerates consistently, upside risks to FOMC policy remain.”