Shafaq News/ The dollar was on track for its best weekly performance inover a month on Friday, underpinned by expectations of fewer Federal Reserverate cuts this year and the view that the U.S. economy will continue tooutperform the rest of its peers globally.
The greenback began the new year on a strong note reaching a more thantwo-year high of 109.54 against a basket of currencies on Thursday as itextended a stellar rally from last year.Its charge higher has come on the back of a more hawkish Fed and a resilientU.S. economy.
"Looks like dollar strength is here to stay for now in early 2025given the U.S. exceptionalism story is here to stay, and it still comes withhigh U.S. yields," said Charu Chanana, chief investment strategist atSaxo.
"Add to that the uncertainty from policies of the incoming (Donald)Trump administration, and you also get the safety aspect of the dollar lookingattractive."
Ahead of U.S. President-elect Trump'sinauguration on Jan. 20, markets have taken his impending return to office withcaution due to uncertainty over his plans for hefty import tariffs, tax cutsand immigration restrictions.
That has in turn given the greenback additionalsafe haven support.
The dollar index last stood at 109.17 and was ontrack for a weekly gain of just over 1%, its strongest since November.
The euro was meanwhile among the biggest losersagainst a towering dollar, having tumbled 0.86% in the previous session to amore than two-year low of $1.022475.
"As far as the euro zone's concerned, therecould be the direct impact of higher trade tariffs on the euro zone or (its)economies, but even perhaps more pertinently, the higher tariffs on China,which will also sort of be that weakness in the euro zone," said KyleRodda, senior financial market analyst at Capital.com.
The common currency last bought $1.0270 and washeaded for a 1.6% weekly decline, its worst since November.
Similarly, sterling ticked up 0.09% to $1.2391,after sliding 1.16% on Thursday. It was on track to lose roughly 1.6% for theweek.
Also helping the dollar extend its dominanceagainst other currencies was the prospect of widening rate differentialsbetween the U.S. and the rest of the world.
While traders are now pricing in just about 45basis points worth of rate cuts from the Fed this year , they see more than 100bps worth of easing from the European Central Bank and roughly 60 bps from theBank of England .
Elsewhere, the yen rose 0.14% to 157.295 perdollar, but stood not too far from an over five-month low of 158.09 per dollarhit in December.
The Japanese currency has been a victim of thestark interest rate differential between the U.S. and Japan for over two yearsnow, with the Bank of Japan's caution over further rate increases spelling morepain for the yen.
The yen tumbled more than 10% in 2024, extendingits losses into a fourth straight year.
Down Under, the Australian dollar edged 0.2%higher to $0.6216 but remained pinned near a more than two-year low, and was ontrack to decline 0.2% for the week.
The New Zealand dollar rose 0.16% to $0.5606,but was likewise headed for a weekly loss of 0.66%.
(Reuters)