By Ankur Banerjee
SINGAPORE (Reuters) – The greenback held agency on the final buying and selling day of the yr, poised for robust good points in 2024 towards most currencies, as buyers brace for fewer declines in American charges and the insurance policies of the brand new Trump administration.
The rise within the greenback, supported by rising Treasury yields, pushed the yen to its lowest ranges since July, when Japanese authorities final intervened. On Tuesday, it stood at 157.02 per greenback, on the right track for a ten% decline in 2024, its fourth consecutive yr of decline towards the greenback.
Japanese markets are closed for the remainder of the week, and with most markets closed on Wednesday for the New Yr vacation, volumes are more likely to be minimal.
That left the greenback index, which measures the U.S. foreign money towards six different main models, at 108.06, not removed from the two-year excessive it touched this month. The index rose 6.6% in 2024 as merchants diminished their bets on huge fee cuts subsequent yr.
The Federal Reserve shocked markets earlier this month by decreasing its 2025 rate of interest forecast by 100 foundation factors to 50 foundation factors on fears of stubbornly excessive inflation.
Goldman Sachs strategists, nonetheless, anticipate three fee cuts from the Fed subsequent yr, assured that inflation will proceed to fall.
“We view the dangers to rates of interest from the insurance policies of the second Trump administration to be extra two-sided than usually understood,” they mentioned in a observe.
The greenback was additionally boosted by expectations that President-elect Donald Trump’s insurance policies of easing laws, slicing taxes, elevating tariffs and tightening immigration will each be favorable to the expansion and inflation and can preserve US yields excessive.
“Though the markets’ preliminary response to Trump’s re-election to the White Home final November was euphoric, they now look like analyzing the brand new administration’s priorities extra rigorously,” mentioned Gary Dugan, managing director of the World CIO Workplace.
THE DOLLAR CASTS A SHADOW
The opportunity of U.S. charges staying excessive for longer has harm most different currencies, significantly these in rising markets, as merchants fear concerning the sharp distinction in rates of interest between the U.S. and different economies .
The euro is anticipated to see a 5.7% decline towards the greenback this yr, with merchants anticipating the European Central Financial institution to make harsher cuts than the Fed. On Tuesday, the only foreign money was secure at $1.04025, whereas remaining near the two-year low of $1.03315 it touched in November.
In what turned out to be one other turbulent yr, the yen broke a multi-decade low in late April and once more in early July, sliding to 161.96 to the greenback, prompting bouts of intervention from Tokyo .
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