The US currency rose as a new Fed cut is expected, while speculation grows about a weaker yuan in 2025.
He global dollar rose against its peers in the early hours of Wednesday, in advance of the release of new data on inflation in USA and as speculation increases about a yuan weak during 2025 before the next government of Donald Trump.
He dollar index —which measures the performance of the greenback in relation to a basket of six other internationally relevant currencies— rose 0.24% to 106.64 units while the euro fell 0.18% to $1.0508 — a day before a meeting of the European Central Bank (ECB)— and the pound fell 0.16% to $1.2752 as traders awaited data from the US CPI
Economists expect both headline and core consumer prices to have risen 0.3% in November, down from increases of 0.2% and 0.3%, respectively, in the previous months. Currently, the probability of a interest rate cut of 25 basis points by the Federal Reserve (Fed) on December 18 are at 85%, but a higher-than-expected inflation figure could possibly alter these expectations, and concern in this regard was supporting the dollar on Wednesday.
“The market is thinking ‘what happens if the CPI report comes out strong?’, and then some of the flexibility expectations of the Fed could be ruled out, which would be a support for the dollar”, explained Jane Foley, director of foreign exchange strategy at Rabobank in London. He said that he dollar was also being affected by the report of Reuters that the main leaders and policy makers of China are considering allowing the yuan to weaken in 2025 as they prepare to duty highest trades in a second Donald Trump presidency in the United States.
The contemplated measure reflects China’s recognition that it needs greater economic stimulus to combat Trump’s threat to impose higher tariffs, people with knowledge of the matter said, according to the report. China is expected to celebrate its Central Economic Work Conference annual this week, after Monday’s Politburo meeting promised to shift to a monetary policy “appropriately lax” to stimulate economic growth.
“If a currency depreciation served as a tactic to counteract the tariff shock, the likely escalation of the trade war could reinforce the exceptionalism (of the US dollar) and weigh on regional currencies,” he said Ken Cheung currency strategist Mizuho.
The dollar in Uruguay continues to rise
Meanwhile, in Uruguay, the dollar exceeded 44 pesos and reached new maximum values in almost three years, after rising 0.69% compared to Monday and closing at 44,028 pesos, according to the price of the Central Bank (BCU).
In this way, the greenback reached its fifth consecutive day on the rise and has accumulated an improvement of 2.02% so far this month, as a result of variables such as the weakness of the Brazilian real and the rebound of global dollar.
Source: Ambito
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