The US dollar jumped to a two-year high in the first day of 2025 trading, driven by strong expectations for US economic growth. The dollar index rose 0.77% to 109.38, its highest level since November 2022.
US President-elect Donald Trump’s policies are also expected to boost growth and potentially add to upward price pressures. The Federal Reserve has indicated that it will be more cautious in cutting interest rates, keeping them relatively elevated.
The euro tumbled 1.01% to $1.025, its lowest since November 2022, after breaking below the $1.03 level. Traders anticipate deep interest rate cuts from the European Central Bank in 2025, with markets pricing in at least four 25-basis-point cuts.
Sterling fell 1.19% to $1.2368, its lowest since April, and the Japanese yen reached a five-month high above 158.09 yen, potentially putting pressure on the Bank of Japan’s decision to raise interest rates early this year.
The yuan dropped to 14-month lows due to concerns about China’s economy and potential US import tariffs from Trump’s administration. Cryptocurrencies, including bitcoin, rose 2.77% to $97,404.93.
Source: https://www.reuters.com/markets/currencies/dollar-starts-2025-higher-yen-rooted-five-month-lows-2025-01-02