13:00 ▪
6
min reading ▪ by
Luc Jose A.
The American dollar has established itself as the flagship currency of 2024, and unquestionably dominates the foreign exchange market. As many global economies face challenges such as rapid inflation and geopolitical uncertainties, the greenback is posting its best performance in almost a decade. This spectacular progression is based on several solid pillars: a robust American economy, attractive bond yields and a monetary policy skillfully orchestrated by the Federal Reserve. Added to this is a global context marked by the weakening of competing currencies, such as the yen or the euro, incapable of competing against the supremacy of the dollar. This growth reflects the resilience of the United States, but also sheds light on the economic divides shaking the rest of the world.
An uncontested rise on the markets
In 2024, the US dollar recorded a rise of 7%, according to the Bloomberg Dollar Spot Index, confirming its status as the undisputed leader among global currencies. This rise in power is based on several converging factors which strengthen investor confidence. The US economy, supported by robust indicators, continues to outperform its international counterparts. At the same time, the Federal Reserve, under the leadership of Jerome Powell, is adopting a prudent monetary strategy. The latter affirmed that interest rate reductions would be made gradually, which would limit speculation about drastic adjustments. Such a measured approach stabilizes markets and fuels expectations of a coherent long-term monetary policy.
At the same time, US bond yields are reaching high levels, with the 10-year rate peaking at 4.641%. This increased attractiveness of American assets diverts financial flows from other currencies, which further accentuates the advance of the dollar. Conversely, competing currencies suffer heavy losses. The Japanese yen fell 12%, while the Norwegian krone and New Zealand dollar also fell. For its part, the euro posted a notable drop of 5.5%, and is trading at $1.04, a historically low level which revives concerns of an imminent parity with the greenback. Thus, the strength of the dollar is in line with current economic data, which highlights the resilience of the United States in the face of a global context marked by growing economic and geopolitical uncertainties.
Overall consequences and prospects
The triumph of the dollar goes beyond the currency market. Its impact extends to commodities and cryptos, revealing cascading effects across various segments of the global economy. Gold, despite a slight recent decline, recorded a remarkable annual performance with an increase of 27%. This move, attributed to increased geopolitical tensions and inflation concerns, reflects the precious metal's central role as a safe haven. At the same time, bitcoin maintains a price close to $94,320, after reaching a peak of $108,000. However, volatility remains omnipresent in the crypto market, amplified by the expiration of options contracts totaling $14.5 billion. This outcome could influence crypto trends in 2025, which would further increase the uncertainty surrounding this sector.
The dominance of the dollar is not without consequences, however. Indeed, emerging economies, whose debts and imports largely depend on the American currency, are under increasing pressure. The appreciation of the greenback increases their financial burdens and complicates the balance of their trade balance. At the same time, trade tensions exacerbated by Donald Trump's aggressive tariff plans add a layer of uncertainty to an already tense global context. While some observers hail the economic resilience of the United States, others question the sustainability of this domination in a world marked by growing economic and political divides. Questions about the future of US monetary policy and the impact of these global imbalances remain open, making 2025 a year full of issues and challenges to watch.
The dollar, thanks to the consolidation of its role as a refuge currency in 2024, sheds light on the fragile balance of the world economy. This undeniable success for the United States reflects the strength of its economic model, but it also increases pressures on emerging economies and trading partners. As global imbalances widen, questions about the sustainability of this domination multiply. As 2025 looms, economic players will have to face major challenges in a context marked by geopolitical tensions and lasting uncertainties.
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Luc Jose A.
A graduate of Sciences Po Toulouse and holder of a blockchain consultant certification issued by Alyra, I joined the Cointribune adventure in 2019. Convinced of the potential of blockchain to transform many sectors of the economy, I took the commitment to raise awareness and inform the general public about this constantly evolving ecosystem. My goal is to enable everyone to better understand blockchain and seize the opportunities it offers. I strive every day to provide an objective analysis of current events, to decipher market trends, to relay the latest technological innovations and to put into perspective the economic and societal issues of this ongoing revolution.
