(Bloomberg) — U.S. economic strength dampens expectations for a Fed rate-cutting cycle, as President-elect Donald Trump’s threat of tough tariffs underpins bullish views on the dollar. The dollar is heading for its best year in nearly a decade.
Most Read Articles on Bloomberg
The Bloomberg Dollar Spot Index has risen more than 7% year-to-date, its biggest gain since 2015. All developed countries’ currencies weakened against the dollar as other central banks had to support regional economies.
“The main pillar supporting the dollar this year is the strength of the economy,” said Skylar Montgomery Corning, foreign exchange strategist at Barclays. “This strength means that the Fed is united in shallow rate-cutting cycles, keeping U.S. interest rates higher than other countries and helping to maintain the dollar’s historically high value.”
Earlier this month, the dollar gauge hit its strongest level in more than two years when the Federal Reserve cut interest rates but signaled a slowdown in the pace of monetary easing. Still, Wall Street sees more room for the dollar to rise in 2025, with global economic growth improving later this year, potentially supporting other currencies and weighing on the greenback.
So far in 2024, the yen, Norwegian krone and New Zealand dollar have performed worst among the G10, each having fallen more than 10% against the dollar as of December 27. There is. The euro is almost trading down about 5.5%. A growing number of strategists see the common currency at risk of reaching parity with the dollar next year, at $1.04.
The Bloomberg Dollar Spot Index rose slightly on Friday, capping a fourth week of gains and rising along with long-term Treasury yields as traders assessed the Fed’s monetary path and the incoming Trump administration’s policies.
Nonprofit speculative traders have steadily increased their bullish bets on the dollar in the run-up to and since the U.S. presidential election. The company currently has approximately $28.2 billion in contracts tied to future U.S. dollar appreciation, the highest amount since May.
Goldman Sachs analysts led by Kamaksha Trivedi said: “While the current dollar strength is consistent with upcoming data, we do not believe the market has fully priced in our tariff expectations. “Risks to our forecast remain to the upside in the medium term,” Goldman Sachs analysts led by Kamaksha Trivedi said in a note. Dec. 20 “Especially if stronger sentiment leads to more sustainable growth in the U.S. despite increased protectionist measures.”
(Updates level, Bloomberg Dollar Index.)
Most Read Articles on Bloomberg Businessweek
©2024 Bloomberg LP
