Dollar Dominates Early 2025 Amid Expectations of Continued Strength

The U.S. dollar showed volatility as it commenced 2025, but expectations for sustained strength persist due to economic policies under the new Trump administration. Factors such as rate differentials and geopolitical tensions continue to bolster dollar demand, while other currencies like the yen and euro display varied performance.

The U.S. dollar experienced some fluctuation on the first trading day of 2025 as predictions continue to support its upward performance akin to 2024. Market participants are closely monitoring the Trump administration's anticipated economic policies, which are expected to stimulate growth and increase price pressures.

The dollar maintains appeal due to significant interest rate disparities with other economies, causing major currencies to weaken appreciably against it throughout 2024, with the yen notably declining over 10% for the fourth consecutive year.

Despite recent minor gains by the yen and euro, the dollar's robust yield and safe-haven status keep it in 'pole position.' Attention remains on potential interest rate cuts by the ECB that could influence currency markets throughout the year.

(With inputs from agencies.)