Written by Lei Wee
SINGAPORE (Reuters) – The dollar rose for the first time in more than a month on Friday, supported by expectations that the Federal Reserve will cut interest rates less this year and that the U.S. economy will continue to outperform the rest of the world. Recorded the best performance. .
The dollar started the new year on a strong note, extending its impressive gains from last year on Thursday to $109.54, its highest against a basket of currencies in more than two years.
Interest rates rose on the back of the Federal Reserve becoming more hawkish and the US economy's resilience.
“The dollar strength looks set to continue for some time into early 2025, given the continuation of the story of American exceptionalism and the continued high U.S. yields,” said Charles Chanana, chief investment strategist at Saxo.
“Add to this the uncertainty from the incoming (Donald) Trump administration's policies, and the safety aspect of the dollar starts to look attractive.”
Ahead of President-elect Donald Trump's inauguration on January 20, markets are cautious about Trump's impending re-inauguration due to uncertainty surrounding his plans for high import tariffs, tax cuts, and immigration restrictions. .
This gave the US dollar additional safe-haven support.
The dollar index was last at 109.18, up 1.1% for the week, its highest level since November.
Meanwhile, the euro was the biggest loser against the soaring dollar, falling 0.86% in the previous session to hit $1.022475, its lowest in more than two years.
“As far as the eurozone is concerned, increasing trade tariffs could have a direct impact on the eurozone and (its) economy, but perhaps more appropriate would be increasing tariffs on China, which could also be a kind of weakness for the eurozone. There will be 'the eurozone,''' said Kyle Rodda, senior financial market analyst at Capital.com.
The currency was last bought at $1.0272, down 1.6% for the week and on course for its steepest decline since November.
Similarly, the pound rose 0.04% to $1.2385, after falling 1.16% on Thursday. The stock was expected to fall about 1.6% for the week.
The prospect of widening interest rate spreads between the United States and the rest of the world also helped the dollar expand its advantage over other currencies.
Traders are currently pricing in a Fed rate cut of just about 44 basis points (bps) this year, compared to more than 100 basis points (bps) from the European Central Bank (ECB) and more than 100 basis points (bps) from the Bank of England. is expected to ease by approximately 60 basis points (bps).
Elsewhere, the yen rose 0.16% to 157.25 yen to the dollar, not far from its five-month low of 158.09 yen to the dollar in December. be.
