The resurgence of the US dollar has caught global financial markets off guard in 2024, with the US dollar index reaching its highest level since early November, closing at 106.26 index points on Tuesday. The dollar’s strength is attributed to the robust performance of the US economy and its status as a top haven for investors.
Asian currencies, including the yen, dong, and rupee, have been adversely affected by the strong dollar, with the yen nearing multi-decade lows against the greenback. The widening US-Japanese interest rate differential, coupled with a favorable risk tone, has dampened the safe-haven appeal of the yen.
Meanwhile, the euro has been battered by the dollar’s strength, experiencing its largest monthly decline since January. Expectations of rate cuts by the European Central Bank (ECB) and the Bank of England (BoE) have further weighed on the euro and the sterling.
Investors, who initially anticipated a weaker US dollar in 2024, have been compelled to reconsider their outlook due to the booming US economy and persistent inflation. The International Monetary Fund (IMF) predicts faster domestic output growth in the US compared to its Group-of-Seven counterparts.
Source: Nairametrics