The WSJ Dollar Index is down 0.24 point or 0.24% today to 103.28

—Largest one-day point and percentage decline since Monday, Jan. 6, 2025

—Down for two consecutive trading days

—Down 0.33 point or 0.32% over the last two trading days

—Largest two-day point and percentage decline since Monday, Jan. 6, 2025

—Off 1.77% from its record close of 105.14 hit Tuesday, Sept. 27, 2022

—Off 0.32% from its 52-week high of 103.61 hit Friday, Jan. 10, 2025

—Up 8.36% from its 52-week low of 95.31 hit Friday, Sept. 27, 2024

—Rose 5.55% from 52 weeks ago

—Month-to-date it is up 0.51%

—Year-to-date it is up 0.53 point or 0.51%

Data based on 5 p.m. ET values

Source: Tullett Prebon and Dow Jones Market Data

Persistent Inflation to Keep U.S. Dollar Strong, Treasury Yields High

1241 GMT – Persistent inflation could support the U.S. dollar and Treasury yields, DHF Capital’s Erik Boekel says in a note. “While the U.S. 10-year yields retreated from the 4.8% mark, they remain above last year’s high and could react strongly to tomorrow’s inflation data,” the chief commercial officer says. The dollar benefits from robust expectations of a hawkish Federal Reserve, he says. Strong labor data ahead of President-elect Donald Trump’s upcoming inauguration have driven the dollar to multi-year highs, with fewer rate cuts priced in, he says. Wednesday’s U.S. inflation data and comments from several Fed officials should provide clarity on the 2025 monetary policy outlook, Boekel says. The 10-year Treasury yield last trades little changed at 4.789%, according to Tradeweb.

This Year Could Be Tales of Two Stories for U.S. Dollar

1122 GMT – The year 2025 could be a story of two halves for the U.S. dollar, with strength in the first half turning into a partial or full reversal in the second half, UBS Global Wealth Management’s Mark Haefele says in a note. The U.S. dollar, which hit its highest in more than two years against several major currencies on Monday, is “in strongly overvalued territory,” the chief investment officer says. UBS GWM expects the euro to fall to $1.00 by March 2025, before recovering to $1.02 in June and then to $1.06 in December. The euro is last up 0.1% at $1.0258. It hit a two-year low of $1.0179 on Monday, FactSet data show.

Sterling Could Weaken Again in Near Term

1113 GMT – Sterling could face further phases of weakness in the near term as concerns remain about the recent jump in yields on longer-dated U.K. government bonds, or gilts, Natixis’s Nordine Naam and Celine Clari say in a note. The fall in sterling and the rise in gilt yields is linked to doubts about the government’s ability to reduce public deficits in the face of sluggish domestic growth and the Bank of England’s decision to keep the bank rate at a high level of 4.75%, the forex strategists say. In the absence of any announcements of corrective fiscal measures by the British government, sterling is likely to remain under selling pressure, they say. Sterling recovers modestly Tuesday. GBP/USD is last at 1.2190, having hit a two-year low of 1.2100 Monday.

Yen Stays Under Pressure as Markets Await Data, Central Bank Clarity

0947 GMT – The yen wavers around six-month lows against the dollar as markets await key economic releases from the U.S. and Japan, says Erik Boekel, chief commercial officer at DHF Capital. Next week’s BOJ rate decision will be pivotal for the yen near term, he says in a note. A hike is widely expected, but uncertainty about the BOJ’s long-term policy direction weighs on sentiment, Boekel says. USD meanwhile benefits from robust expectations of a hawkish Fed, plus strong labor data and the upcoming Trump inauguration. Upcoming U.S. inflation numbers and Fed remarks are in focus. Persistent inflation could support USD and Treasury yields, while softer-than-expected data may boost the yen. U.S.-Japan yield differentials could widen if U.S. data is stronger than expected and the Fed stays hawkish, he adds.

Sources: The Wall Street Journal

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