He global dollar held firm on Monday, as global currencies headed to the end of a year characterized by divergent outlooks from central banks.
He dollar indexwhich measures the price of the greenback against a basket of six other major currencies, rose 0.1% to 108.1, Reuters reported. It has held around this level after hitting a two-year high of 108.54 on Friday the 20th.
The index, supported by rising US yields and expectations that interest rates the Federal Reserve (Fed) remain high for longer, rose 2.1% in December, bringing year-to-date gains to 6.5%.
“Despite paid forecasters almost universally predicting a weaker US dollar in 2024, the currency appears on track to close the year higher against all major currencies,” said Chris Weston, head of research at Pepperstone.
The dollar has gained in each of the last three months, and traders hope that the president-elect’s policies donald trump more flexible regulation, tax cuts, tariff increases and stricter immigration are both pro-growth and inflationary, which will likely keep US yields elevated.
On the other hand, the yen was trading near five-month lows, steady at 157.85 with the risk of Japanese intervention preventing another test of the 160 level last seen in July. The dollar has gained 10 yen since December 3 and much of the Japanese currency’s decline came after the Federal Reserve’s cautious message about future rate cuts.
The japanese yields remain remarkably low and recent comments have cast doubt on the commitment of the Bank of Japan (BoJ) to raise rates. The BoJ kept interest rates steady at 0.25% at this month’s meeting and the governor Kazuo Ueda He said the central bank was looking at more data on next year’s wage boost and clarity on the incoming US administration’s economic policies.
Traders are watching for any possible intervention by Japanese officials to prop up the currency if it continues to weaken, as they have done several times this year.
A market limited by holidays
The poor liquidity year-end kept other currencies in tight ranges. He euro fell 0.2% to $1.0412, not far from its recent lows. The European currency is headed for an annual fall of approximately 5.5% against the dollar, after the European Central Bank (ECB) will cut interest rates four times this year and with markets expecting the ECB to adopt a faster pace with rate cuts than the Fed in 2025.
The ECB’s next interest rate cut could take longer to come after a recent spike in inflation, ECB member said Governing Council of the ECB Robert Holzmann, quoted on Saturday.
The cryptocurrency leader, the bitcoinis up about 0.5% at $93,578, but is down about 3% on the month after retreating from an all-time high of $108,379.28 reached on December 17. It has increased about 120% so far this year.
Source: Ambito
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