Dollar Soars to Eight-Year High
The US dollar is on track to experience its strongest quarterly performance in nearly a decade, driven by expectations that the Federal Reserve will maintain relatively high interest rates next year.
Fed’s Stance Boosts Dollar’s Appeal
The greenback has surged 7.1% since October 1, according to the WSJ Dollar Index, which measures the currency’s value against a basket of 16 foreign currencies. If it holds steady until the end of the quarter, this will mark its largest three-month percentage gain since the final quarter of 2016.
Higher Yields Lure Foreign Investors
At the heart of the dollar’s strength lies the Federal Reserve’s stance on interest rates. Chair Jerome Powell recently hinted that the central bank may only cut rates twice in 2025, citing inflation that remains above its 2% target. This has made the dollar more attractive to foreign investors seeking higher yields.
Higher Borrowing Costs Fuel Dollar’s Rise
When borrowing costs are higher, currencies become more appealing to investors. As a result, the dollar has gained an edge over its rivals, making it a more attractive option for those seeking higher returns. With the Fed’s stance expected to remain unchanged, the dollar’s upward trajectory is likely to continue.
Leave a Reply