DBG Shield Bo official website: The US dollar generally performed well in 2024, and the Australian dollar and the New Zealand dollar had a difficult year

The dollar rallied in the last trading day of the year and is on track for strong gains against most currencies in 2024 as investors brace for fewer U.S. interest rate cuts and the incoming Trump administration's policies.

The dollar index remained near 108, not far from the two-year high it hit this month.Dunbo foreign exchange official websiteAccording to the analysis, the dollar index has risen 6.6% in 2024 as traders have reduced their bets on a significant rate cut next year.

Wary of stubbornly high inflation, the Federal Reserve stunned markets earlier this month by cutting its 2025 rate cut forecast from 100 basis points to 50 basis points.

Still, strategists at Goldman Sachs expect the Fed to cut interest rates three times next year, in the belief that inflation will remain on a downward trend. "We believe the risks to interest rates from Trump's policies in a second term are more mixed than widely expected," they said in a note.

Expectations that Trump's deregulation, tax cuts, higher tariffs and tighter immigration policies will stimulate economic growth and push up inflation, while keeping U.S. Treasury yields high, have been boosting the dollar.

Gary Dugan, chief executive of the Global CIO Office, said: "While the market's initial reaction to Trump's victory in November was euphoria, they now appear to be analysing the incoming administration's priorities more closely."

U.S. interest rates are likely to remain elevated for longer, weighing on most other currencies, especially emerging market ones, as traders worry about wide spreads between the U.S. and other economies.

Euro

The euro, which held steady near $1.041 on Tuesday but remained close to a two-year low of $1.03315 hit in November, could fall 5.7 per cent against the dollar this year as traders expect the European Central Bank to cut interest rates more aggressively than the Federal Reserve.

Yen

It has been another year of volatility for the yen, which fell below multi-decade lows in late April and early July to as low as Y161.96 against the dollar, prompting the Japanese authorities to intervene.

In September, the yen hit a 14-month high of 139.58 before giving up gains and is now back around 157, as traders watch for signs of intervention from Tokyo.

The Bank of Japan kept interest rates steady at its meeting this month, and Bank Governor Kazuo Ueda said the central bank was carefully studying more data on the momentum of wage growth next year and waiting for clarity on the economic policies of the new U.S. administration.

Surveys conducted earlier this month suggested that the Bank of Japan could raise interest rates before the end of March. Interest rate markets put the probability of a January rate hike at just 41%.

The yen fell to its lowest level against the dollar since the latest intervention by Japanese authorities in July. The yen was around 157 against the dollar on Tuesday, and is expected to lose 10% for the year, the fourth consecutive year of depreciation.