Investing.com – The U.S. dollar rose in thin trading influenced by the holidays on Tuesday, maintaining recent strength as traders prepared for fewer Federal Reserve rate cuts in 2025.
At 04:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 107.905, near its recently reached two-year high.
The dollar remains popular
The dollar has been in demand since the Federal Reserve last week outlined a hawkish outlook for its interest rates after its final policy meeting of the year, expecting just two 25 basis point rate cuts in 2025.
In fact, markets are now pricing in an easing of around 35 basis points through 2025, which in turn pushed up US Treasury yields, boosting the dollar.
Two-year Treasury yields last stood at 4.34%, while 10-year yields remained near a seven-month high at 4.59%.
“We believe this aggressive adjustment to Fed communications will lay the foundation for sustained dollar strengthening in the new year,” ING analysts said in a note.
Trading volumes are likely to decline as the end of the year approaches, with this trading week shortened by the festive period.
Euro almost at two-year low
In Europe, yields fell 0.1% to 1.0396, near a two-year low, with the aim being to cut rates faster than US rivals as the eurozone struggles to post any growth.
The ECB cut its key rate for the fourth time this year earlier this month, and President Christine Lagarde said earlier this week that the euro zone was “very close” to reaching the central bank’s medium-term inflation target.
“If the incoming data continues to confirm our baseline, the direction in which we are moving is clear and we expect to cut rates further,” Lagarde said in a speech in Vilnius.
Eurozone inflation stood at 2.3% last month and the ECB expects it to reach its 2% target next year.
traded largely flat at 1.2531, with the pound showing signs of weakness after data showed the UK economy failed to grow in the third quarter, and Bank of England policymakers voted 6-3 last week to leave rates unchanged , a more moderate split than expected.
The Bank of Japan’s position in pictures
In Asia, yields fell 0.1% to 157.03, after rising as high as 158 yen in recent sessions, after signaling that it will take time to consider more rate hikes.
fell 0.1% higher to 7.3021, holding near a one-year high, as the prospect of more fiscal spending and looser monetary conditions in the year ahead weighed on the currency.
Beijing has indicated it will increase budget spending in 2025 to support slowing economic growth.
