The euro neared its highest level in four years as traders brace for a Fed rate cut, Bloomberg reports.

The EU single currency hit its highest since July 3 on Tuesday, adding 0.3% to $1.1791. It has gained nearly 14% in 2025, its best nine-month gain on record.

A break of July's high of $1.1829 would mark its highest since September 2021, and forecasts suggest that could set the stage for a rally to $1.20.

Demand is being supported by expectations that the ECB will not cut rates, while the Fed is ready to begin an easing cycle. The prospect of three full 25 basis point Fed rate cuts by the end of the year adds to the appeal of the single European currency. Weekly reversals in risk dynamics, a gauge of positioning and sentiment, show a steady increase in demand for options to buy the euro after the ECB signaled the end of easing. Morgan Stanley strategists say the dollar's tactical stance remains neutral ahead of the Fed's decision. That could mean the euro still has room to rise if policymakers justify market bets on three rate cuts this year.