The dollar rose broadly today, holding near a two-year high, while the yen edged up from five-month lows against the greenback as traders continued to digest the likelihood that the Federal Reserve will make fewer rate cuts next year.

The U.S. currency has rallied in recent weeks on expectations for a less dovish U.S. central bank as inflation remains above the Fed’s 2% annual target. Analysts also expect policies from President-elect Donald Trump’s U.S. administration to both bolster growth and add to price pressures next year.

Fed policymakers this month cut their interest-rate forecast for 2025 to 50 basis points of cuts, from 100 basis points, and Fed Chair Jerome Powell said more reductions in borrowing costs now hinge on further progress in lowering inflation.

The dollar index is on track for a 6.6% gain this year. It was last up 0.1% on the day at 108.08, after reaching a two-year high of 108.54 on Dec. 20.

The yen has suffered from a wide interest-rate differential between Japan and the United States.

The dollar is on pace for an 11.4% return against the Japanese currency this year, its fourth yearly increase. It was last down 0.51% at 157.02 yen.

Some analysts see the yen as likely to benefit next year from expected Bank of Japan interest-rate hikes while the Fed eases, but with U.S. Treasury yields continuing to rise, this has not yet been captured in the exchange rate.

“With above-target inflation remaining persistent for much of 2024, price pressures could increase further should the yen weaken even more. To support its currency, the Bank of Japan may wish to start raising rates more meaningfully,” said Fawad Razaqzada, market analyst at City Index.

Some Bank of Japan policymakers saw conditions falling into place for an imminent rate hike, with one predicting a move “in the near future,” a summary of opinions at the bank’s December meeting showed on Friday, keeping alive the chance of a January hike.

Traders are also watching for any potential intervention by Japanese officials if the yen continues to weaken.

Japan Finance Minister Katsunobu Kato on Friday reiterated concerns over a sliding yen, repeating his warning that the government would take action against excessive currency moves.

The euro is heading for a 5.8% drop on the dollar this year, after the European Central Bank cut interest rates four times in 2024 and with markets expecting the ECB to take a quicker pace with rate cuts than the Fed in 2025. It was last down 0.25% at $1.0401.

The next interest-rate cut by the ECB could be longer in coming after a recent uptick in inflation, ECB Governing Council member Robert Holzmann was quoted as saying on Saturday.

Sterling fell 0.26% to $1.2546 and is on pace for an annual loss of 1.4%.

Bitcoin fell 0.17% to $94,222, and is down from a record high of $108,379.28 on Dec. 17. The cryptocurrency has surged about 122% this year.