The US currency reached new multi-month highs against the euro and the pound, while traders keep their expectations unchanged.
He global dollar hit new multi-month highs against the euro and the pound on Thursday, the first trading day of 2025, as it built on last year’s strong gains amid expectations that US interest rates They will remain high relative to their peers.
He dollar index —which measures the performance of the greenback in relation to a basket of six other currencies of international relevance— rose 0.2% in the early hours of Thursday, up to 108,702 units; at the same time that the euro fell to $1.0314, its lowest level since November 2022, after a decline of around 0.3% on the day. It is now down almost 8% from its late September highs above $1.12, one of the main victims of the recent rise in the dollar.
Traders anticipate sharp interest rate cuts by the European Central Bank (ECB) in 2025, and markets expect at least four 25 basis point cuts, although they are not sure whether the United States Federal Reserve (Fed) I’m not going to do even two of those movements.
“It’s more of the same at the start of the new calendar year, with the dollar “continuing to advance in anticipation of Trump implementing friendly policies at the beginning of his term,” he told Reuters. Lee Hardman senior currency analyst MUFG.
It is expected that the policies of the president-elect of the United States, Donald Trump, not only boost growth, but also increase upward pressure on prices. That will lead to a Fed cautious about cutting rates too much, which in turn will prop up bond yields. United States Treasury bondsdemand for dollars will be boosted.
Weaker growth prospects outside the United States, the conflict in Middle East and the war between Russia and Ukraine They have also contributed to increasing the demand for dollars.
The dollar against the yen
He dollar also reversed an early loss on Thursday to rise against the yenand finally rose 0.17% to 157.26 yen. It hit a five-month high above 158 yen in late December, which could put pressure on the Bank of Japan (BoJ)which is expected to raise interest rates early this year, but possibly not immediately.
“If dollar/yen were to break above 160 basis points before the next Bank of Japan meeting, that could be a catalyst for it to raise rates in January rather than waiting until March,” Hardman said. “Though for now markets are leaning toward March after (Gov. Kazuo Ueda in his last press conference,” he added.
Even those who are more cautious about the sustained strength of the dollar believe that it could take a long time to manifest: “The dollar “may be vulnerable, but only if US data confounds market expectations that the Fed will not cut rates more than once in the first half of this year, and not by more than 50 basis points in all of 2025,” he said. Kit Juckes, chief currency strategist Societe Generale in a note, adding that “there is a good chance of that happening, but it seems very unlikely that cracks will appear in US growth early in the year – hence my preference to take away any bearish thoughts on the dollar to hibernation until the weather improves.
Source: Ambito
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