Dollar Surge: Global Currencies Plummet as Fed Rate Stays High

The dollar has reached new multi-month highs against the euro and the pound as markets anticipate high U.S. interest rates. In contrast, the euro and the pound have dipped amid expectations of rate cuts by the European Central Bank. Trump's economic policies and geopolitical tensions contribute to dollar strength.

The dollar soared to new multi-month highs against the euro and the pound on Thursday, marking the first trading day of 2025. This rise builds on last year's gains, as traders expect U.S. interest rates to remain higher than their global counterparts.

The euro fell to $1.0314, marking its lowest point since November 2022. Anticipating deep interest rate cuts from the European Central Bank, traders are pricing in significant reductions for 2025, contrasting with the fewer expected cuts from the U.S. Federal Reserve.

President-elect Donald Trump's anticipated policies are expected to spur growth and inflation, strengthening U.S. Treasury yields and boosting dollar demand. Geopolitical tensions and a weaker international growth outlook further fuel this trend, with the yen and Swiss franc also impacted.

(With inputs from agencies.)