Year-End Portfolio Rebalancing Weighs on Dollar
As the clock winds down on 2024, investors are busy rebalancing their portfolios, leading to a decline in the US dollar. The greenback’s remarkable gains over the past year, particularly since Donald Trump’s presidential election win in November, have prompted investors to take profits.
Dollar’s Stellar Performance in 2024
Despite the current selling pressure, the dollar has enjoyed a remarkable 6.5% gain in 2024, driven by the strength of the US economy. This upward trend is expected to continue into 2025, as the US economy remains robust compared to other major economies.
Federal Reserve’s Interest Rate Outlook
Investors have adjusted their expectations regarding the Federal Reserve’s interest rate policy. Initially, many anticipated more aggressive rate cuts, but now they expect a more moderate approach. This shift in sentiment has contributed to the dollar’s recent decline.
Looking Ahead to 2025
As investors position themselves for the new year, the dollar’s prospects remain bright. Its strong performance in 2024 has set the stage for further gains in 2025, driven by the ongoing strength of the US economy. With interest rates likely to remain relatively stable, the dollar is poised to remain a key player in the global currency market.
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