The global dollar falls due to inflation that is projected to be lower than expected in the US

The global dollar falls due to inflation that is projected to be lower than expected in the US

He global dollar fell after trading near its highest level in more than two years on Tuesday, ahead of a weaker-than-expected December Producer Price Index (PPI) report, which could give greater scope to the Federal Reserve (Fed) to continue with the easing of monetary policy and cuts in interest rates.

He dollar index —which measures the performance of the greenback relative to a basket of six other internationally relevant currencies— fell 0.4% to 109.44, after Bloomberg reported that Donald Trump’s economic team is studying the possibility of an implementation gradual and very moderate tariff increase promised in the campaign by the president-elect, with the aim of avoiding an inflationary shock, the main fear of operators and one of the forecasts that keeps the dollar strong.

The possibility of a measured approach would give the Fed greater scope to continue with interest rate cuts in a scenario with lower inflationary pressures ahead. On this, in addition, the publication of the PPI, prior to the most relevant Consumer Price Index (CPI)showed a much weaker increase than expected.

Operators discounted 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.

Source: Ambito

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