Written by Uncle Banerjee
SINGAPORE (Reuters) – The U.S. dollar rose on Thursday, supported by rising U.S. Treasury yields, pushing the yen, pound and euro near multi-month lows amid changing tariff threats.
Market focus in 2025 will be on the policies of US President-elect Donald Trump, who will re-enter the White House on January 20th, with analysts expecting his policies to boost growth and increase upward pressure on prices. I am doing it.
CNN reported Wednesday that President Trump is considering declaring a national economic emergency to legally justify a series of universal tariffs against allies and adversaries. On Monday, the Washington Post reported that President Trump was considering more nuanced tariffs, which he later denied.
The growing threat of tariffs has pushed bond yields higher, with the yield on the benchmark 10-year U.S. Treasury note hitting 4.73% on Wednesday, its highest level since April 25. In Asian time, it was 4.6769%.
“There is no doubt that President Trump's changing rhetoric on tariffs is having an impact on the US dollar,” said Kieran Williams, head of Asian currencies at InTouch Capital Markets. It seems like something we have to adapt to.”
“Tariff negotiations are likely to support the US dollar in the short term, but also introduce complexities with unknown implications.”
The dollar remains strong due to the decline in the bond market, casting a shadow on the foreign exchange market.
The euro fell to $1.03095, down from a two-year low hit last week, as investors remain worried that tariff uncertainty could push the single currency down to the crucial $1 mark this year. It remains at a similar level.
Sterling was little changed at $1.2353 in early Asian trade, after hitting its lowest since April on Wednesday as British bond yields hit multi-year highs.
Chris Weston, head of research at Pepperstone, said: “There is clearly reason to be monitoring the UK bond market closely. Recent trends are certainly concerning.”
“However, we can have some confidence that the Bank of England is more prepared this time around and is considering measures to intervene if a liquidity event in the gold market causes the market to become dysfunctional.”
The fall in both the pound and the gold price was even steeper in September 2022, amid the turmoil surrounding former chancellor Liz Truss's 'mini-budget'.
The dollar index, which measures the U.S. currency against six other units, stood at 109.03, just shy of the two-year high hit last week. The index rose 7% last year as traders adjusted their expectations for the pace of U.S. interest rate cuts.
