Dollar Dominates: U.S. Currency Starts 2025 Strong Amid Global Market Shifts

The U.S. dollar has entered 2025 strongly, outpacing other currencies due to high U.S. interest rates and geopolitical tensions. The yen notably declined over 10% for the fourth consecutive year, sparking intervention concerns. Meanwhile, the euro and other currencies stumbled, reflecting broader economic challenges.

The U.S. dollar began 2025 robustly on Thursday, continuing its impressive gains from the previous year as it outperformed most global currencies. The Japanese yen approached its lowest level in over five months, prompting speculation about potential U.S. interest rate stability.

Investor attention is directed towards the new Trump administration's policies, expected to stimulate growth but pressure prices, leading to higher U.S. Treasury yields and escalating dollar demand. A significant interest rate differential between the U.S. and other economies has put the currency market in a tailspin, with most currencies showing a steep decline against the dollar in 2024.

The yen experienced a drop exceeding 10% for the fourth straight year and weakened to 157.54 per dollar, triggering fears of intervention by Japanese authorities. The dollar index, tracking the U.S. currency against six others, was near a two-year high at 108.53, highlighting the dollar's continued strong position due to high yields, U.S. exceptionalism, and its safe-haven status amid geopolitical tensions.

(With inputs from agencies.)