Dollar set for best week since November on rate cut expectations

The dollar is set for its best week in more than a month on Friday, supported by expectations of slower rate cuts this year and analysts suggesting the US economy will continue to outperform its rivals.

The dollar started the new year on a strong note, hitting a more than two-year high of 109.54 against a basket of currencies on Thursday, extending a remarkable upward trajectory that has been ongoing since last year.

The rise in the US currency is due to the Federal Reserve’s tightening of monetary policy as well as the strength of the economy.

“The strength of the dollar seems to be here to stay as we enter the new year as the story of American exceptionalism continues,” said Charu Chanana, investment strategist at Saxo Bank.

“Along with the uncertainty over the policies of the incoming Trump administration, you also get the safety factor of the attractiveness of the dollar,” she added.