Global dollar remains near 26-month high, impacts other competitive currencies

He global dollar rose in the early hours of Friday and remained near its highest level in more than two years on Tuesday, as traders reduced their bets on rate cuts in USA in 2025 after strong economic data, while investor concerns about the fiscal health of Great Britain They kept the fragile pound in the spotlight.

He dollar index — which measures the greenback’s performance relative to a basket of six other internationally relevant currencies — rose 0.05% to 109.44, not far from the 26-month high of 110.17 hit on Monday.

With the elected president donald trump ready to return to White House next week, attention has focused on his policies, which analysts expect will boost growth but increase pressures on prices. The threat of duty, together with the measured approach declared by the Federal Reserve (Fed) for rate cuts this year, has pushed up Treasury yields and the dollar, putting the euro, pound, yen and yuan under pressure.

However, on Tuesday, the market returned its focus to the possibility of US tariffs being gradually raised, following a media report suggesting the US could take a measured approach.

“The nomination hearing of Scott Bessent for secretary of United States Treasury Thursday will be interesting, especially if he makes any comments about the dollar and other currencies, possible tariffs, a Federal Reserve in the shadows and the fiscal prospects of the United States,” he told Reuters Paul Mackel, global head of foreign exchange research at HSBC. In that sense, Bessent is expected to keep the deficit US and use tariffs as a negotiating tool, mitigating the expected inflationary impact of US economic policy.

After Friday’s spectacular jobs report reinforced support for the U.S. central bank’s cautious stance on higher easing of monetary policy This year, investors will closely monitor US inflation readings, with producer prices due later on Tuesday and consumer prices on Wednesday.

Traders are pricing in 30 basis points of easing this year, less than the 50 basis points that the Fed projected in December, when he shook the market with his measured approach to rate cuts due to concerns about the inflation.

For its part, the returns of the 10-year US Treasury bonds They hit a 14-month high of 4.805% on Monday in a volatile session before retreating and holding steady at 4.755%.

The strategists of ING They said that the combination of a dollar Stronger and higher Treasury bond yields are crowding out the financial flows to the rest of the world and is starting to cause problems. “Taking the 2018-2019 tariff era as a model, we hope that the dollar remains strong all year,” they said in a note, adding that the most important battlefield in the currency market at the moment is the dollar/yuan, where the People’s Bank of China is still managing to hold the line even as depreciation pressure intensifies.

Meanwhile, the euro rose 0.2% to $1.0263, after hitting $1.0177 on Monday, its lowest level since November 2022. The single currency fell more than 6% in 2024, as that investors became concerned about tariff threats and the divergence of monetary policy between the Fed and the European Central Bank (ECB).

“We project a range euro/dollar 0.95-1.05 this year and we remain bearish,” he said George Saravelosglobal head of foreign exchange strategy at Deutsche Bank. “The market is pricing in a terminal gap between the Fed and the European Central Bank of 200 basis points compared to our view of 300 basis points, given the divergence in fiscal and growth outcomes,” he added.

New high of the year in Uruguay

In Uruguay, meanwhile, the dollar rose 0.27% compared to Friday and closed at 44,079 pesos in the interbank price of the Central Bank (BCU), opening the week on the rise after chaining its second consecutive increase and reaching a new high so far this year

The North American currency now accumulates a monthly (and annual) decline of 0.03% in January, since its price was 0.13 pesos below that registered at the end of 2024.