Dollar Set for Best Week Since November on US Economic Outlook
The dollar is poised for its strongest weekly performance since November, driven by expectations of fewer rate cuts and a robust US economy.
Dollar, US Economy, Federal Reserve, Interest Rates, Singapore
SINGAPORE: The dollar is really on a roll this week! It’s gearing up for its best performance in over a month, thanks to some solid expectations about the Federal Reserve not cutting rates as much this year. Plus, the U.S. economy is looking pretty strong compared to others around the globe.
Just yesterday, the dollar hit a two-year high against a bunch of currencies, reaching 109.54. It’s been riding a wave of good news since last year, and it seems like that momentum is sticking around.
Experts are saying that this dollar strength might be here to stay for a while. With the Fed being more hawkish and the U.S. economy holding its ground, it’s a good time for the greenback. Charu Chanana from Saxo mentioned that the whole “U.S. exceptionalism” vibe is still in play, especially with high U.S. yields.
And let’s not forget about the uncertainty surrounding the incoming Trump administration. That’s adding a bit of a safety net for the dollar, making it look even more appealing to investors.
As we approach Trump’s inauguration, markets are a bit cautious. There’s a lot of chatter about his plans for tariffs and tax cuts, which is keeping everyone on their toes. This uncertainty is giving the dollar a little extra boost as a safe haven.
Right now, the dollar index is sitting at 109.18, and it’s on track for a weekly gain of about 1.1%. That’s the best it’s seen since November!
On the flip side, the euro is taking a hit, dropping to a two-year low against the dollar. It fell 0.86% recently, and analysts are worried about how higher trade tariffs could impact the eurozone.
Meanwhile, the British pound is also feeling the pressure, although it did tick up a bit after a rough day. It’s still looking at a weekly loss of around 1.6%.
With all this going on, the dollar is really flexing its muscles against other currencies. Traders are expecting a bigger gap in interest rates between the U.S. and other countries, which is only adding to the dollar’s strength.
Even the yen is struggling, hovering near a five-month low. The Bank of Japan’s cautious approach to rate hikes isn’t helping its case either.
Down in Australia, the Aussie dollar is inching up but still close to a two-year low, while the New Zealand dollar is also facing a weekly loss.