The dollar remained resilient on Thursday as Asian markets experienced slight pullbacks in holiday-thinned trading, easing some of the gains made earlier in the week, Reuters reports.
The dollar’s strength continued to be fueled by rising US Treasury yields, while investor focus remained on the Federal Reserve’s interest rate outlook as the year draws to a close.
The greenback traded near a two-year high against a basket of major currencies, reaching 108.15, and was on track for a monthly gain exceeding 2%. The US dollar’s renewed strength weighed on commodities and precious metals, with the Australian and New Zealand dollars among the hardest hit. The Aussie dollar fell 0.5% to $0.6238, while the New Zealand dollar dropped 0.58% to $0.5646. The euro also saw a slight dip of 0.18%, trading at $1.0399, and the Japanese yen continued to struggle near a five-month low at 157.35 per dollar.
This strength in the dollar came after Federal Reserve Chair Jerome Powell signaled fewer rate cuts in 2025 during the central bank’s December policy meeting. The markets have since adjusted their expectations, pricing in only about 35 basis points worth of rate easing for next year. As a result, US Treasury yields saw a rise, with the 10-year yield ticking up by 2.6 basis points to 4.613%, and the two-year yield firming to 4.3489%.
“The Fed’s shift to a less accommodative stance, paired with its focus on both sides of the dual mandate, suggests that markets will place greater emphasis on economic data in the new year,” said Tom Porcelli, chief US economist at PGIM Fixed Income.
In Japan, scheduled sales of Japanese government bonds (JGB) were set to increase slightly, but yields on JGBs moved little in response, remaining in line with the rising US Treasury yields.
Asian shares were subdued on Thursday, with MSCI’s broadest index of Asia-Pacific shares outside Japan dipping 0.1%. However, the index was still on track to finish the week with a 1.6% gain, buoyed by strong performance earlier in the week, driven by positive sentiment from Wall Street. US equity futures were also marginally higher, with S&P 500 futures up by 0.08% and Nasdaq futures advancing by 0.27%.
Globally, stocks looked set to finish the year on a high note, with world stocks poised to register their second consecutive annual gain of over 17%. The gains were largely attributed to a strong performance from US equities, which continued to benefit from booming artificial intelligence investments and robust economic growth, drawing global capital to US assets.
“At first glance, markets appear to suggest exceptional exuberance has presided over 2024,” noted Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho Bank.
In Japan, the Nikkei was up by 0.95% on Thursday, tracking an 18% annual gain, while Chinese indices also posted positive movements. China’s CSI300 blue-chip index gained 0.08%, and the Shanghai Composite added 0.14%, both heading for yearly gains of more than 10%, supported by increased government measures to stabilize the economy.
Meanwhile, Bitcoin stayed under the $100,000 mark, slipping by 0.37% to $98,071. The cryptocurrency’s decline extended from its recent record high, with the Fed’s hawkish stance affecting its momentum. Bitcoin’s recent drop also followed news that Russian companies have begun using digital currencies for international payments in response to Western sanctions, signaling a shift in the global use of cryptocurrencies.
In commodities, Brent crude futures rose by 0.08% to $73.64 per barrel, while US crude gained 0.1% to $70.17. Gold, another asset sensitive to the dollar’s strength, saw a slight increase, ticking up by 0.5% to $2,626.19 an ounce.
