The US dollar is expected to achieve its best annual performance in nearly a decade

Due to the resilience of the U.S. economy, the Federal Reserve is more cautious about interest rate cuts, while President-elect Trump may adopt trade protectionist measures. These factors have jointly contributed to the strengthening of the U.S. dollar. Major developed economies' currencies have generally weakened against the dollar, as these countries have adopted more accommodative policies to support their domestic economies.

Although the Federal Reserve cut interest rates again earlier this month, it indicated that it would slow the pace of easing in the future. The U.S. dollar index briefly climbed to its highest point in over two years. The Bloomberg Dollar Index has risen more than 7% this year and is expected to record its best performance since 2015 for the entire year.

Non-commercial speculative traders have continued to increase their long positions in the dollar before and after the U.S. election. They currently hold about $28.2 billion in contracts linked to the future appreciation of the dollar, the highest level since May.

So far in 2024, the Japanese yen, Norwegian krone, and New Zealand dollar have performed the worst among G10 currencies, each declining more than 10% against the dollar. The euro has fallen about 5.5% against the dollar, hovering around $1.04, with an increasing number of analysts expecting the euro to reach parity with the dollar next year.

Barclays foreign exchange strategist Skylar Montgomery Koning stated that the performance of the U.S. economy this year is the main factor supporting the dollar. This has led the Federal Reserve to implement only limited interest rate cuts, keeping U.S. interest rates higher than those of other economies and maintaining the dollar at elevated levels.

Goldman Sachs' analyst team believes that the current strength of the dollar is consistent with economic data, and the market's digestion of tariff expectations is still incomplete. If market sentiment strengthens and U.S. growth resilience exceeds expectations, the dollar still faces upward risks in the medium term.

While Wall Street bets on greater upside potential for the dollar in 2025, some market participants believe that if global economic growth improves later next year, non-U.S. currencies may be boosted, thereby suppressing the dollar