Dollar Hits Strongest Weekly Run Amid High U.S. Yields

The dollar experienced a dip on Friday but is set for a strong weekly performance due to expectations of robust U.S. economic growth and sustained high interest rates. Despite uncertainties surrounding new U.S. policies, the dollar's strength persists with global currencies reacting variably.

The dollar experienced a temporary dip on Friday, yet it is poised to close the week with its most robust performance since early November. This surge is driven by expectations that the U.S. economy will outshine global competitors this year, maintaining relatively higher interest rates. A resilient labor market and persistent inflation have elevated Treasury yields, spurring demand for the U.S. currency.

The incoming Donald Trump administration's new policies, including business deregulation, tax cuts, and immigration tariffs, are anticipated to bolster growth and heighten price pressures. Consequently, the dollar index slightly slipped by 0.16% to 109.04 but remains geared for a 0.94% weekly gain after reaching a two-year high.

Despite recent gains, uncertainties loom regarding the timing and effects of these new policies, potentially momentarily halting the dollar rally. Expert Helen Given from Monex USA suggests a short-term dollar pullback, especially as implementing tariffs will require time. Meanwhile, the euro and yen face challenges, with euro rate cuts and U.S. tariffs potentially dampening growth, and Japan's low rates further impacting the yen.

(With inputs from agencies.)