Good news about the dollar.. What’s new in green?
The US dollar fell during trading, Friday, but it is heading to record its best weekly performance since early last November, due to expectations that the US economy will continue to outperform its global counterparts this year and that US interest rates will remain relatively higher.
A strong labor market and high inflation have pushed up Treasury yields in the past few weeks and boosted demand for the US currency.
The new policies of the incoming Donald Trump administration, which include easing regulations on economic activity, reducing taxes, and placing restrictions on illegal immigration and customs duties, are also expected to boost growth and increase price pressures.
Price movements
The dollar index fell by 0.16 percent today to record 109.04, after recording the highest level in two years at 109.54 yesterday, Thursday.
Currently, the dollar is on track to achieve a weekly gain of 0.94 percent.
Despite the recent gains achieved by the dollar, uncertainty still exists regarding the date of implementing the policies that the new US government intends to implement, and what effects this may have in the end.
For reference, the aforementioned matter may lead to a halt to the rise of the dollar in the near term.
“We will likely see a slight decline in the dollar with the arrival of the new administration because all of these proposed tariffs will take some time to implement and we don’t really know if all of these will be implemented,” said Helen Giffen, who trades foreign exchange at Monex USA in Washington. Proposals or not.
“As we move into the second half of this year, I think we will see more dollar strength,” Giffen added.
The euro faces weaker growth expectations and could be hurt by US tariffs, as the European Central Bank is expected to cut interest rates more than the Federal Reserve this year.
Traders expect the European Central Bank to cut interest rates by 100 basis points by the end of the year, and they are not confident that the US Reserve will cut interest rates by 50 basis points.
The euro rose at $1.0289, but is on track to record a weekly decline of 1.35 percent, which is the worst since early November.
The pound sterling rose against the dollar by 0.15 percent to $1.2399, and was on its way to a loss of about 1.39 percent during the week, the largest loss since early November.
The dollar fell 0.15 percent to 157.29 Japanese yen, reaching just below the five-month high of 158.09 reached in December.
The Japanese currency has been a victim of the large interest rate differential between the United States and Japan for more than two years now, with the Bank of Japan warning that raising interest rates would lead to more pressure on the currency.
