The dollar continues to dominate the markets at the start of 2025 driven by high interest rates and geopolitical issues.
The dollar started 2025 on a strong note this Thursday, after a year of significant gains against most other currencies.
The Dollar Index, which measures the U.S. currency against six other currencies, stood at 108.53 in early trading, close to a two-year high reached last Tuesday. This index increased by 7% in 2024.
As the year begins, the market will focus on the new Trump administration and its policies, which are expected to not only boost growth but also increase price pressure, supporting US Treasury yields and strengthening demand for the dollar.
Furthermore, the weakening of international growth prospects, geopolitical tensions in the Middle East and the conflict in Ukraine have also intensified the attraction of the dollar.
Interest rates weigh on currency markets
At the same time, the wide interest rate gap between the United States and other economies has clouded the currency market, causing most currencies to fall sharply against the dollar.
The yen, in particular, fell more than 10% for the fourth year in a row. On the first day of 2025, it weakened to 157.54 per dollar, closing in on Tuesday's five-month low, raising concerns about possible intervention by Japanese authorities.
As for the euro, it remained stable at $1.0353 after losing more than 6% in 2024. Operators expect more pronounced interest rate cuts from the European Central Bank (ECB ) in 2025, with forecasts for easing of 113 basis points, compared to 42 basis points for the US Federal Reserve (Fed).
Jihen Mkehli
Published on 02/01/25 09:30
