1554 ET – The dollar maintains early gains, with the ICE’s DXY gauge rising closer to the 110 mark. Analysts link the greenback’s strength to expectations of a pause on interest rate cuts by the Fed, which could be a long one depending on what policies the incoming Trump administration will implement. Treasury yields remain high, despite a lukewarm performance today. Geopolitical tensions also fuel demand for the dollar’s perceived safety, analysts say. Both the DXY and the broader WSJ Dollar Index are at their highest since late 2022. The dollar strengthens around 1% against the euro and the sterling and rises slightly versus the yen. (paulo.trevisani@wsj.com @ptrevisani)
Dollar Hits 2-Year High on Prospect of Cautious Fed
1513 GMT – The dollar’s momentum extends into 2025, amid expectations that the U.S. Federal Reserve will cut interest rates by less than other central banks. Demand for dollars as a safe haven is also lifting the currency, XS.com’s Rania Gule writes. Relatively high U.S. interest rates, coupled with geopolitical tensions, mean that “the dollar is likely to stay at the forefront of global currencies, boosting its appeal in the short term,” Gule says. The ICE dollar index rises 0.3% to 108.981, its highest since late 2022, while the euro weakens 0.4% to a two-year low of $1.0301, according to FactSet. The dollar rises 1% versus sterling but falls 0.2% against the yen.(paulo.trevisani@wsj.com; @ptrevisani)
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Sterling Falls to 8-Month Low Versus Buoyant Dollar
1541 GMT – Sterling falls to its lowest in eight months against a broadly stronger U.S. dollar. A strong U.S. economy and the anticipation of inflationary policies from President-elect Trump—including tariffs and tax cuts—following his inauguration mean that U.S. interest rates are expected to fall by less than elsewhere. “With the turn of the year, markets are focusing their attention on Trump’s inauguration later in the month,” says Ballinger Group analyst Kyle Chapman in a note. Sterling also falls after the U.K.’s purchasing managers’ survey on manufacturing activity was revised down further into contractionary territory. Sterling falls 1.1% to a low of $1.2371, according to FactSet. (jessica.fleetham@wsj.com)