U.S. Dollar Rises Amid Economic Uncertainty and Tariff Concerns

The U.S. dollar gained for a third day as Treasury yields remained high amid inflation and tariff concerns under the Trump administration. Strong economic indicators suggest a slow pace of interest rate cuts by the Federal Reserve. Investors focus on upcoming payrolls data for further insights.

The U.S. dollar strengthened for the third consecutive day on Thursday as Treasury yields dipped but remained elevated. This movement came amid persistent concerns over potential tariffs under the incoming Trump administration. The 10-year Treasury note reached a significant high of 4.73% on Wednesday, driven by a robust economy and inflation apprehensions, sparking expectations of a slower path for Federal Reserve interest rate cuts.

Economic indicators reveal a stable labor market, while minutes from December's Federal Reserve meeting expressed new inflation concerns, hinting that the administration's policies could hamper economic growth and elevate unemployment rates. Investors are keenly awaiting Friday's government payroll report to assess how aggressive the central bank might be concerning interest rate reductions.

The dollar index rose by 0.15% to 109.18, while the euro dropped by 0.2% to $1.0297. Despite high uncertainty, Federal Reserve officials advocate a cautious approach to future rate reductions. Sterling saw a decline due to pressure on the British government over elevated borrowing costs linked to Trump's policies. Japanese yen, however, strengthened against the dollar, further impacted by falling inflation-adjusted wages in Japan. Analysts project a potential rate hike from the Bank of Japan in January amid ongoing discussions.

(With inputs from agencies.)