Dollar Soars in 2024, Supported by Cautious Fed and Trump Trade
The dollar is set for strong gains in 2024, driven by cautious Fed policies and expectations surrounding the Trump administration’s economic strategies
Dollar, Fed, Trump, Singapore, Yen, Euro, Cryptocurrency
Singapore: The dollar is looking pretty strong as we wrap up the year. It’s on track to gain against most currencies in 2024. Investors are betting on fewer rate cuts from the U.S. Federal Reserve and are keeping an eye on what the Trump administration will do next.
With rising Treasury yields, the dollar has pushed the yen down to its lowest levels since July. Right now, it’s sitting at about 157.02 per dollar, which means the yen could drop around 10% in 2024. That’s four years in a row of declines against the dollar!
Japanese markets are closed for the week, and with New Year’s Day coming up, trading volumes are expected to be super low. This has kept the dollar index, which tracks the U.S. currency against six others, at 108.06, not far from a two-year high it hit earlier this month. It’s up 6.6% in 2024 as traders are pulling back on bets for big rate cuts next year.
Earlier this month, the Fed surprised everyone by lowering their interest-rate forecast for 2025. They’re now looking at just 50 basis points of cuts instead of 100, mainly because inflation is still pretty stubborn.
Goldman Sachs thinks the Fed will cut rates three times next year, believing inflation will trend down. They mentioned that the risks from Trump’s policies could go either way, which is something to keep in mind.
The dollar is also getting a boost from expectations that Trump’s policies—like tax cuts and tighter immigration—will help the economy grow and keep U.S. yields high.
After Trump’s re-election in November, the markets were initially super excited. But now, they seem to be taking a more cautious approach, analyzing what the new administration will prioritize.
With U.S. rates likely to stay higher for longer, other currencies are feeling the pinch, especially in emerging markets. The euro is expected to drop about 5.7% against the dollar this year, as traders think the European Central Bank will cut rates more aggressively than the Fed.
In a year full of ups and downs, the yen hit multi-decade lows earlier this year, prompting some intervention from Japan. It even reached a 14-month high in September but has since fallen back to around 157, with traders watching for any signs of intervention from Tokyo.
The Bank of Japan kept rates steady this month, and their governor is keeping an eye on wage growth and the new U.S. administration’s policies. A recent poll showed that the BOJ might raise rates by the end of March, but there’s only a 41% chance of a rate hike in January.
The British pound is holding steady at $1.2545, but it’s still on track for a 1% drop in 2024. Meanwhile, the Australian and New Zealand dollars are also struggling, hovering near their two-year lows.
In the crypto world, bitcoin is inching up to $92,370, still below its record high from mid-December. But it’s set for a whopping 117% rise this year!