The dollar edged higher on Monday, driven by speculation over U.S. interest rate cuts and political uncertainty in Europe. The dollar index rose to 106.17 after gaining 1.8% in November, while the euro slipped 0.4% to $1.0532 amid political turmoil in France.
President-elect Donald Trump added to the dollar’s support, warning BRICS nations against pursuing alternative currencies, threatening 100% tariffs on non-compliant countries.
Markets are closely watching the November payrolls report on Friday, which could solidify expectations for a Federal Reserve rate cut of 25 basis points on December 18. Fed Chair Jerome Powell’s comments midweek and other key economic data are also expected to shape sentiment.
Meanwhile, the yen struggled after a 3.3% rebound last week, but optimism about rising domestic interest rates kept it steady. Bank of Japan Governor Kazuo Ueda signaled further hikes, as Tokyo inflation rose and business investment surged 8.1% in the third quarter.
In Europe, political risks weighed heavily on the euro. France faces a potential no-confidence vote that could topple Prime Minister Michel Barnier’s government, intensifying concerns over widening budget deficits and rising yields.
As global markets brace for critical rate decisions and political developments, analysts predict a period of consolidation for the dollar, with risks skewed in its favor heading into 2025.
