Dollar Soars Amid Global Rate Cut Expectations

The dollar reached a 2 1/2-week high, supported by expectations of Federal Reserve rate cuts and recent decisions by the European and Swiss central banks. Market sentiment for the Fed's cautious approach in 2025 and upcoming rate decisions by the Bank of Japan continue to bolster the U.S. currency.

The dollar achieved a 2 1/2-week peak against key currencies on Friday, riding on prospects of the Federal Reserve reducing interest rates next week while maintaining a cautious approach for further cuts.

Boosted by recent rate reductions at the European Central Bank and the Swiss National Bank, the U.S. currency also strengthened against the yen amid speculation that the Bank of Japan might refrain from a rate hike. The dollar index, which evaluates the greenback against the euro, yen, and other major currencies, climbed to 107.05, marking its highest level since November 26.

Expectations for a Federal Reserve cut on December 18 remain high despite recent soft U.S. producer price data. However, only a 21% probability is seen for another cut in January, as traders adjust their outlook based on rhetoric from Fed officials and economic performance indicators. The dollar also performed strongly against the yen, franc, and euro throughout the week.

(With inputs from agencies.)