Dollar struggles as Fed rate-cut bets build

TOKYO (Reuters) - The U.S. dollar languished at multi-week lows against major peers on Thursday as traders ramped up bets for the Federal Reserve to resume cutting interest rates next month.

Rising expectations for Fed easing combined with increasing institutional cryptocurrency investment powered bitcoin to a fresh record peak.

It was a slightly different story in the U.S. where Fed rhetoric has turned overall more dovish of late on signs of a cooling labour market, while President Donald Trump's tariffs have not added to price pressures in a significant way just yet.

Traders see a Fed rate cut on September 17 as a near certainty, according to LSEG data, and even lay around 7% odds on a super-sized half-point reduction.

The Fed also continues to be under intense political pressure to ease.

Trump has repeatedly criticised Fed Chair Jerome Powell for not cutting rates sooner, even threatening to oust him before Powell's term expires in May.

Treasury Secretary Scott Bessent on Wednesday called for a "series of rate cuts," and said the Fed could kick off the policy easing with a half-point cut.

Bessent also said the Bank of Japan had gotten "behind the curve" by delaying rate hikes.

The U.S. dollar dropped 0.7% to 146.38 yen , its weakest since July 24.

Sterling edged up enough to reach its highest since July 24 at $1.3590.

The euro hovered at $1.1712, just below Wednesday's peak of $1.1730, a level last seen on July 28.

The U.S. dollar index , which measures the currency against those three rivals and three other major counterparts, eased slightly to 97.673. It dropped some 0.8% over the previous two sessions, having dipped to 97.626 on Wednesday for the first time since July 28.

A weaker U.S. dollar, the spectre of political interference in central bank policy, and the increase in investor risk appetite amid Fed easing prospects all converged to buoy bitcoin

The Australian dollar gained as much as 0.4% to the highest since July 28 at $0.65685.

Australian employment rebounded in July as firms took on more full-time workers, pulling the jobless rate down from a 3-1/2-year high.

The upbeat report implied there was less urgency for the Reserve Bank of Australia to follow up this week's rate cut with another in September.