Driven by Donald Trump’s imminent return to the White House, the dollar rose to a new high in more than two years against the euro on Thursday, as the 47th president of the United States plans policies likely to boost American inflation.
Around 4:10 p.m. in Paris, the American currency had increased by 0.53% against the euro, to 1.0301 dollars, a new high since the end of November 2022 against the European currency. The greenback also rose 1.06% against the British currency, to $1.2385 per pound, after climbing to its highest since April 2024, at $1.2384.
“This is simply a continuation of the dollar’s upward trend seen in the second half of last year, particularly after Donald Trump’s victory,” said AJ Bell analyst Russ Mould. .
Unemployment benefit claims down
This movement was accentuated on Thursday by the surprising drop in applications for unemployment benefits in the United States. 211,000 were recorded during the week ended December 28, the lowest since April 2024, and a positive signal for the US economy.
The American Federal Reserve (Fed) is now only considering two interest rate cuts this year, compared to four previously projected. Analysts say the European Central Bank (ECB) is likely to cut rates at a faster pace than the Fed, given weak growth in the euro zone, where inflation is hovering near the 2% target set by the the ECB.
On the Bank of England side, the market still projects two to three cuts in 2025. The pound is also suffering from sluggish economic activity in the United Kingdom, where growth remained zero in the third quarter and where large tax increases were announced. by the Labor government have businesses worried about the coming year.
Bank of Japan expected to raise rates
Conversely, the Japanese currency increased by 0.18% against the greenback, to 156.96 yen per dollar. Drawing on Japanese economists, the Japan Times estimated Wednesday that the Bank of Japan is likely to raise rates two or three times this year, which could bring the benchmark rate to 1.00 percent for the first time in three decades.
Since March, the BoJ has begun normalizing its monetary policy by raising its rates twice in 2024. But during its last meeting in December, its governor Kazuo Ueda spoke of a prolonged pause in monetary policy tightening, given the climate economic uncertainty.
The persistent weakness of the yen could, however, “increase pressure on the BoJ to raise its rates” as early as January, judged Lee Hardman, analyst at MUFG.
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