Dollar stands tall in 2024, propped up by cautious Fed, Trump trade
By Ankur Banerjee
SINGAPORE (Reuters) – The dollar was steady on the final trading day of the year, poised for a big rally against most currencies in 2024 as investors braced for fewer U.S. interest rate cuts and policies from the incoming Trump administration.
The dollar’s rise, helped by rising Treasury yields, pushed the yen to its lowest level since July, when Japanese authorities last intervened, at 157.02 per dollar on Tuesday, down 10% in 2024. , which marked the fourth consecutive year of decline against the dollar.
Japanese markets are closed for the rest of the week, and with most markets closed on Wednesday for the New Year holiday, volumes are likely to drop sharply.
That left the dollar index, which measures the U.S. currency against six other major units, at 108.06, not far from a two-year high hit this month.The index rose 6.6% in 2024 as traders look ahead to have cut bets on a deep rate cut.
Earlier this month, the Federal Reserve shocked markets by cutting its 2025 interest rate forecast to 50 basis points from 100 basis points, wary of persistently high inflation.
Goldman Sachs strategists, though, expect three rate cuts from the Fed next year, confident that inflation will still fall.
“We see interest rate risks from the second Trump administration’s policies as more lopsided than widely believed,” they said in a note.
The dollar was also boosted by expectations that President-elect Donald Trump’s policies of looser regulations, tax cuts, higher tariffs and tougher immigration will be both pro-growth and pro-inflation and keep US yields high.
“While markets’ initial reaction to Trump’s re-election to the White House in November was euphoric, they now appear to be taking a closer look at the incoming administration’s priorities,” said Gary Duggan, chief executive officer of the Global CIO Office.
THE DOLLAR IS THROWING A SHADOW
The prospect of longer US interest rates has hit most other currencies, especially in emerging markets, as traders worry about the steep interest rate differential between the US and other economies.
The euro is expected to fall 5.7% against the dollar this year, and traders expect the European Central Bank to cut more sharply than the Fed.The single currency was steady at $1.04025 on Tuesday, but remained close It hit a two-year low of $1.03315 in November.
In another tumultuous year, the yen breached multi-decade lows in late April and again in early July, hitting 161.96 to the dollar and triggering bouts of intervention in Tokyo.
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