By Karen Brettell
NEW YORK (Reuters) – The U.S. dollar jumped to a two-year high on Thursday in the first day of 2025 trading, building on last year's strong gains on expectations U.S. growth will beat peers and keeping US interest rates high.
The Federal Reserve has indicated that it will be more cautious in cutting interest rates as inflation remains stable above the annual target of 2% and the economy remains strong.
Policies by US President Donald Trump are also expected to boost growth and could contribute to increasing price pressures.
“In terms of economic growth to 2025, there is no competition for the dollar,” said Adam Button, chief currency analyst at ForexLive in Toronto.
“Capital flows are the biggest at the start of the year and the US stock market has really put every other global market to shame,” Button said. “The dollar is the only game in town until be a real disaster in the US economy.”
Thursday's data confirmed that the jobs market remained strong. The number of Americans filing new claims for unemployment benefits fell to an eight-month low last week, pointing to low levels at the end of 2024.
changed so far +0.77% compared to yesterday.
The euro fell 1.01% to $1.025, the lowest level since November 2022.
The single currency's losses accelerated after it broke below the $1.03 level, indicating that technical factors were deepening the sell-off.
Traders are expecting deep cuts in interest rates from the European Central Bank in 2025, with markets pricing in at least four 25-basis-point cuts, although they are unsure of even two such moves from Fed.
ECB policy man Yannis Stournaras said on Thursday that he expected the bank's main interest rate to be cut to 2% by autumn, from 3% at present.
Sterling, which held up better than most major currencies against the greenback last year, fell 1.19% to $1.2368, its lowest level since April. Its fall accelerated after it broke through resistance around $1.2475.
The dollar gained 0.47% to 157.61 Japanese yen.
It hit a five-month high of 158.09 yen in late December, which could put pressure on the Bank of Japan, which is expected to raise interest rates early this year, but probably not soon.
fell to 14-month lows as concerns about the health of the world's second-largest economy, expected US import tariffs from the Trump administration and local output weighed on investor sentiment. CNY/
In cryptocurrencies, bitcoin rose 2.77% to $97,404.93.
