Dollar Soars Amid Market Volatility and Fed Policy Speculation

The dollar is poised for its largest weekly gain in over a month, driven by market speculation on Federal Reserve policies and the anticipated economic impact of President-elect Trump's proposals. Volatility in currency markets remains high, with expectations of fewer rate cuts bolstering the dollar's strength against major currencies.

The dollar is on track for its biggest weekly advance in over a month, buoyed by reduced expectations of Federal Reserve rate cuts and anticipation of President-elect Donald Trump's economic policies. With markets volatile, investors are weighing the potential benefits of Trump's tax and tariff strategies for the dollar against global consequences.

Trading near a one-year high at 106.81 against a basket of currencies, the dollar has climbed nearly 1.8% this week. Key factors in its climb include market speculation that higher inflation under Trump could limit the Fed's ability to cut interest rates. Fed Chair Jerome Powell acknowledged economic growth and persistent inflation as reasons for caution, noting the need to remain data-dependent.

Elsewhere, Sterling is on course for its steepest weekly decline since January 2023, while the euro struggles with significant losses against the strong dollar. The yen's depreciation has raised intervention talks, slipping over past safe levels. Meanwhile, bitcoin has dipped below $90,000 after rapid gains in anticipation of friendlier U.S. regulations.

(With inputs from agencies.)