By Kevin Buckland
TOKYO (Reuters) -The U.S. dollar slipped to a one-week low versus major peers on Wednesday, looking to extend a three-day decline from a one-week peak as the market catches its breath following the frantic rally in the wake of Donald Trump's election.
The previous day's boost to the dollar and other traditional safe-haven currencies like the yen proved short-lived, after Russia's foreign minister said the country will "do everything possible" to avoid the onset of nuclear war, hours after Moscow announced it would lower its threshold for a nuclear strike.
Bitcoin crept up towards the fresh all-time peak above $94,000 from overnight, carried by expectations for a friendlier regulatory environment for cryptocurrencies under Trump.
The dollar index - which measures the currency against six major peers - fell to a low of 106.07 for the first time since Wednesday of last week, though it had recovered to 106.27 as of 0603 GMT, mainly amid a weakening yen.
The index climbed to a one-year high of 107.07 on Thursday, buoyed by expectations for big fiscal spending, higher tariffs and tighter immigration under the incoming U.S. administration, measures which economists say could foster inflation and potentially slow Federal Reserve easing.
Investors are still waiting for Trump to name a Treasury Secretary, following the announcement of several other high-profile appointments, including Wall Street CEO Howard Lutnick as head of the Commerce Department.
Some of Trump's picks have provoked controversy for their relatively meagre relevant experience.
"The 'Trump Trade' that boosted the greenback is facing challenges from Trump's controversial cabinet nominations and the escalation in the Russian-Ukraine war," DBS strategists wrote in a client note.
For the dollar over longer term though, "more weight should be put on firm economic data and the increasing likelihood that the Fed may have to slow the rate cut path even more in 2025", they said.
Traders continue to pare back expectations for an interest-rate cut at the Fed's next meeting in December. Odds now stand at 58.9%%, down from 82.5% a week ago, according to CME's FedWatch Tool.
Fed Chair Jerome Powell said on Thursday that "the economy is not sending any signals that we need to be in a hurry to lower rates", following a run of robust economic indicators.
The dollar added 0.39% to 154.84 yen, pulled up by rising U.S. Treasury yields. The pair fell sharply to 153.28 on Tuesday following the Russia news.
The euro slipped 0.12% to $1.0585, having recovered from a drop to $1.0524 in the previous session.
Sterling was steady at $1.2685 ahead of a reading on consumer inflation later in the day that could inform the pace of Bank of England rate cuts. BoE Governor Andrew Bailey told parliament on Tuesday that the central bank needs to take a "gradual approach" to easing.
Bitcoin rose 0.4% to $92,593 after reaching a record $94,078.22 late on Tuesday.
The Financial Times reported that Trump's social media company was in talks to buy crypto trading firm Bakkt, bolstering hopes of a cryptocurrency-friendly regime under his administration.
(Reporting by Kevin BucklandEditing by Shri Navaratnam)
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