The US dollar strengthened in thin holiday-affected trading on Tuesday, maintaining recent strength as traders brace for fewer Federal Reserve interest rate cuts in 2025.
At 4:25 AM ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was trading 0.1% higher at 107.905, near a recent two-year high.
The dollar has been in demand since the Federal Reserve outlined a hawkish outlook for interest rates after its final policy meeting of the year last week, projecting just two rate cuts of 25 basis points in 2025.
In fact, markets are now pricing in just about 35 basis points of easing for 2025, which in turn has sent U.S. Treasury yields soaring, boosting the dollar.
The two-year Treasury yield was last at 4.34%, while the benchmark 10-year yield was steady near a seven-month high of 4.59%.
"We think this aggressive readjustment of Fed communication will set the stage for continued dollar strength in the new year," analysts at ING said in a note.
Trading volumes are likely to thin as the year-end approaches, with this trading week shortened by the festive period.
Source: Investing.com
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