SYDNEY- The dollar pushed higher again on Monday in what is shaping up to be a critical week for the prospect of US rate cuts, while drawing verbal support from US President-elect Donald Trump.
In a surprise change of tone, Trump on Saturday demanded that BRICS member countries commit to not creating a new currency or supporting another currency that could replace the dollar or face 100 percent tariffs.
That marked a shift from his prior advocacy of a weaker dollar to fight trade wars and the Chinese yuan quickly slipped to a three-month trough at 7.2662 pre dollar while the Indian rupee hit record lows.
Political uncertainty in France added to pressure on the euro which slipped 0.4 percent to $1.0532 after bouncing 1.5 percent last week and away from a one-year trough of $1.0425.
That saw the dollar index edge up to 106.170 having closed out November with a gain of 1.8 percent even after a setback last week.
“Given the continued resilience of the US economy and a worsening outlook elsewhere, we don’t think this is the start of a deeper setback for the dollar,” said Jonas Goltermann, deputy chief markets economist at Capital Economics.
“But the bar for a further shift in expected interest rates in favor of the US in the near term is quite high,” he added. “A period of consolidation into year-end looks to us like the most likely scenario, although the risks remain skewed in favor of the dollar over the course of 2025.”
Key to the outlook for rates will be the November payrolls report due Friday where median forecasts favor a rise of 195,000 following October’s weather and strike-hit report, which could also be revised given a low response rate for that survey. The jobless rate is seen edging up to 4.2 percent, from 4.1 percent, which should keep the Federal Reserve on course to cut by 25 basis points on Dec. 18.
