The U.S. dollar strengthened on Tuesday as investors anticipate sustained high interest rates, putting pressure on other currencies near record lows.
The dollar strengthened on Tuesday as investors anticipate sustained high U.S. interest rates, pressuring other currencies near record lows. Trading volumes are expected to decrease this holiday-shortened week due to the approaching year-end and the absence of significant economic data releases. The focus remains on interest rate trends as the primary influence on the foreign exchange market. The yen hovered near a five-month low of 157.19 per dollar, having declined 4.7% this month.
This drop has heightened concerns about potential intervention by Japanese authorities. The Bank of Japan (BOJ) maintained rates last week and offered ambiguous guidance on future rate hikes, contrasting sharply with the Federal Reserve's hawkish stance just a day prior, which projected a gradual easing of rates in 2025. Analysts predict that the widening policy divergence between the Fed and BOJ will likely weaken the yen. Meanwhile, the euro traded at $1.0403, close to its two-year low reached in November, while sterling slipped to $1.2534. Against a basket of currencies, the U.S. dollar neared a two-year high of 108.54, currently at 108.10. Although a favorable U.S. inflation reading on Friday eased concerns about the pace of Fed rate cuts next year, markets still anticipate around 35 basis points of easing in 2025, supporting the dollar's strength.
DOLLAR INTEREST RATES JAPANESE YEN FOREIGN EXCHANGE FEDERAL RESERVE
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