Greenback begins 2025 larger; yen rooted at five-month lows

By Ankur Banerjee

SINGAPORE (Reuters) – The U.S. greenback kicked off 2025 on the entrance foot on Thursday after a powerful 12 months of acquire in opposition to most currencies, with the yen sliding towards its lowest degree in additional than 5 months as traders ponder U.S. rates of interest staying larger for longer.

Market focus early within the 12 months shall be on the incoming Trump administration and its insurance policies which can be extensively anticipated to not solely increase progress but additionally add to cost stress, underpinning U.S. Treasury yields and boosting greenback demand.

A large rate of interest distinction between the U.S. and different economies has solid a shadow over the foreign money market, leading to most currencies declining sharply in opposition to the greenback in 2024.

None extra so than the yen which fell greater than 10% for its fourth 12 months of decline. It was weaker on the primary buying and selling day of 2025 at 157.54 per greenback, not removed from the five-month low touched on Tuesday, retaining merchants cautious of intervention from Japanese authorities.

Markets in Japan are closed for the remainder of the week.

The greenback index, which measures the U.S. foreign money in opposition to six others, was at 108.53 in early commerce, simply shy of the two-year excessive touched on Tuesday. The index rose 7% in 2024.

“The U.S. greenback is prone to stay in pole place (this 12 months) given its still-high yield, U.S. exceptionalism and its safe-haven enchantment in unsure instances,” mentioned Saxo Chief Funding Strategist Charu Chanana.

Weaker progress outlook exterior the U.S., geopolitical rigidity within the Center East and the Russia-Ukraine struggle have added to demand for the greenback.

The euro was regular at $1.0353 after dropping greater than 6% in 2024. Merchants anticipate deeper rate of interest cuts from the European Central Financial institution in 2025, with markets pricing in 113 foundation factors of easing versus 42 bps of cuts priced in from the U.S. central financial institution.

Sterling final fetched $1.2519. It fell 1.7% final 12 months however was nonetheless the best-performing G10 foreign money versus the greenback, primarily because the British financial system held up higher than was extensively anticipated.

The Australian and New Zealand {dollars} each began the brand new 12 months larger however stay near the two-year lows touched on Tuesday. The Aussie was 0.1% larger at $0.6199 after a drop of round 9.2% in 2024, its weakest yearly efficiency since 2018.

The kiwi clocked an 11.4% decline final 12 months, its softest efficiency since 2015. On Thursday, it rose 0.27% at $0.5603.