The U.S. dollar rose to a four-month high against major currencies, while Bitcoin continued its record rise, buoyed by economic outlook linked to US President-elect Donald Trump’s policies. On Tuesday morning, the dollar index rose 0.16% to 105.59, approaching the previous day’s high of 105.70, its strongest level since July 3.
This rise indicates continued optimism about the US economic performance in light of the economic policies that Trump is expected to follow, especially given the potential impact of the economic, tax and trade reforms he has promised.
On the other hand, Bitcoin continued to achieve a historic rise, with a value exceeding $ 73,000, reflecting the growing interest in it as an investment tool that keeps pace with global economic transformations.
Many analysts predicted that Bitcoin will continue its rise during the year, with Kyle, senior market analyst at Capital.com, indicating that Bitcoin could end the year at $100,000, reflecting investor optimism in light of financial market volatility.
On the other hand, expectations for a US interest rate cut in December eased, after expectations indicated a possible 0.25% cut, supporting the continued strength of the dollar.
According to CME’s Feed Watch tool, the odds of a rate cut fell to around 69% from 80% a week ago, due to the impact of potential tariffs and threats related to immigration policies that Trump has pledged to implement.
These policies may contribute to strengthening the U.S. economy in the short term, which Strengthen the strength of the dollar in global markets.
In contrast, some other currencies have experienced pressure. The euro has been negatively affected by political uncertainty in Germany, the EU’s largest economy.
Factors that led to the rise of the US dollar
The US dollar has seen a significant appreciation recently, supported by a number of economic and political factors that have contributed to its strengthening value against major currencies. One of the main factors that led to the dollar’s strength is the economic outlook about the US performance under the economic policies of US President-elect Donald Trump.
Many analysts predict that the economic policies Trump may pursue, such as tax reforms and fiscal stimulus, will boost economic growth in the United States. This optimism about The US economy has prompted many investors to strengthen their positions in the dollar, which has strengthened its strength in global markets.
On the other hand, the increase in expectations of interest rate hikes by the Federal Reserve contributed to the appreciation of the dollar.
When the market expects interest rates to increase in the US, this boosts returns on dollar-denominated assets, such as US bonds. Thus, investments in the dollar become more attractive to investors, leading to increased demand for it.
The global economic outlook also played a role in raising the dollar. At a time when most of the world’s major central banks are adopting accommodative monetary policies, such as interest rate cuts or quantitative stimulus programs, the dollar becomes more attractive as interest rates in the United States remain relatively high.
This contrast between U.S. monetary policy and those of other central banks reinforces the dollar’s strength and makes it more attractive to investors looking for better returns. Also, President Trump’s trade orientation and economic policies regarding tariffs and trade policies have contributed to the dollar’s appreciation.
The impact of the US dollar on monetary policy
The US dollar is one of the most prominent factors influencing monetary policy globally, as it is the main reserve currency in international trade. The impact of the US dollar on monetary policy reflects complex interactions between central banks, macroeconomics, and financial stability goals.
As the world’s most traded currency, the dollar makes up a large portion of foreign currency reserves and is used to price many commodities, including oil and gold. This central role of the dollar makes U.S. monetary policy decisions directly affects global economies and, therefore, the monetary policies of other central banks.
When the dollar exchange rate changes, whether due to changes in US interest rates or due to global economic shifts, central banks in different countries must adjust their monetary policies to adapt to these changes. For example, if the US Federal Reserve decides to raise interest rates, it increases the attractiveness of the dollar compared to other currencies.
Raising interest rates increases returns on the U.S. bonds and dollar-denominated assets, attracting foreign investment.
On the other hand, this rise in interest rates leads to huge financial flows into the United States, prompting central banks in other countries to react to these changes, either by raising interest rates to keep pace with US yields or by adjusting their other monetary policies to reduce negative effects on their local currencies.
Changes in the value of the dollar also affect inflation in the domestic economy. For example, when the dollar rises, imports become cheaper for countries that rely on imported goods, reducing inflationary pressure.
