Dec 3 2024: The U.S. dollar maintained its momentum on Tuesday, bolstered by political instability in France that weakened the euro and by economic challenges in China that pushed the yuan to a 13-month low.
The euro fell 0.7% on Monday, opening the week at $1.0487 in Asia, as France grappled with a looming government collapse over budgetary disputes. Meanwhile, the yuan slipped below key support levels, dropping to 7.2996 per dollar after China set its weakest trading band in over a year. Improving U.S. manufacturing data and record-low Chinese bond yields further fueled the greenback’s rise.
Yen and Commodities Under Scrutiny
The yen, which gained against the dollar in November, briefly hit a six-week high of 149.09 on Monday before easing to 150.15. Traders are factoring in a 60% chance of a 25-basis-point rate hike in Japan later this month.
The Australian dollar fell marginally to $0.6472, weighed down by a larger-than-expected current account deficit despite stronger government spending. The New Zealand dollar also edged 0.2% lower to $0.5876.
Trump’s Tariff Threats Support Dollar Outlook
Markets are also reacting to President-elect Donald Trump’s weekend remarks threatening punitive tariffs on BRICS nations unless they commit to the dollar as a reserve currency. Rabobank strategist Jane Foley noted that these comments reinforce expectations of a firm dollar during Trump’s presidency, driven by trade protectionism rather than dollar devaluation.
Looking ahead, traders are awaiting Friday’s U.S. employment data to refine bets on a potential Federal Reserve rate cut in December, currently seen as a 50-50 chance.
