To The Moon

$USD Index(USDindex.FOREX)$ continued to strengthen in 2024, with a cumulative increase of 5.55%, and the index once broke through 108 at the end of November, reaching a new high in over two years.

Out of 11 currencies, only the Hong Kong dollar appreciated against the US dollar, while the remaining 10 currencies depreciated against the US dollar. The ruble depreciated the most, with the US dollar up 14.5% against the ruble (namely the ruble down 14.5%), followed by the New Zealand dollar, yen, Canadian dollar, and Australian dollar, all of which fell sharply by more than 6% against the US dollar. The British pound, Singapore dollar, and Chinese yuan were relatively strong, with only a minor decline of less than 2% against the US dollar.

The main theme of the global foreign exchange market in 2024 revolved around the policy expectations of the Fed, especially changes in the expectations of interest rate cuts, which significantly affected the trend of the US dollar.

The fluctuations of the US Dollar Index in 2024 can be summarized in the following stages:

1. Early January to End of April (Phase 1): Reduced Expectations of Interest Rate Cuts Drive the US Dollar Index Higher

The US Dollar Index rebounded from last year's low of 101, with the highest point reaching 106.4 in April. The strength of the US Dollar Index during this phase was mainly due to the strong economic data in the United States in January, with non-farm and CPI both exceeding expectations, leading to reduced expectations for interest rate cuts by the Federal Reserve.

2. May to Early June (Phase 2): Weakening US Data and BOJ Intervention Weaken the US Dollar Index

Unexpectedly weak US data, including hard data such as GDP, employment data, CPI, and soft data from PMI surveys, were all below expectations; in addition, the Bank of Japan intervened in the foreign exchange market, leading to a collective appreciation of Asian currencies, and the US Dollar Index fell from 106 to 104.

3. June to September (Phase 3): Non-Farm and European Political Risks Strengthen the US Dollar Index

The turning point was the release of the May non-farm data of 272 thounsand people, which greatly exceeded expectations at the beginning of June. Although the June CPI was weak, the FOMC unexpectedly took a hawkish stance on the same day, with the median of the dot plot showing only one interest rate cut this year, and the US Dollar Index rebounded again. Moreover, the rise of right-wing forces in Europe led to a significant drop in the euro, and the US Dollar Index rebounded to the 106 mark. US CPI, PMI, and other data showed signs of marginal decline, and the market continuously increased its expectations that the Fed would shift to a dovish stance, and even have to significantly cut interest rates in the short term. The Fed started the interest rate cut cycle in September with a 50 basis point cut.

4. October to End of Year (Phase 4):

Accompanying the approaching US presidential election, market sentiment changed significantly. The new round of appreciation of the US dollar against the RMB from 7.01 to 7.27, investors' expectations for Donald Trump's re-election dominated the foreign exchange market, leading to further increased volatility.

Recommended Interaction>>

[Events] Unlock Your 2025 Investment Outlook 🎉

The following are trends, influencing factors, and investment advice for the US dollar outlook in 2025 from top institutions.

1. Institutions' 2025 Outlook for the $USD Index(USDindex.FOREX)$

For the expectations of the US Dollar Index in 2025, Wall Street investment banks generally predict that long-term interest rates will remain high or drive the US dollar to maintain a strong trend in 2025, and non-US currencies may still face depreciation pressure.

1. Goldman Sachs in its annual foreign exchange outlook said that the dollar will enter an era of "stronger and more enduring." The bank said that the "strong dollar" will become the main melody of the foreign exchange market in 2025, and this trend will last for a long time.

2. Morgan Stanley (Morgan) expects the US Dollar Index to be at the level of 101 by the end of next year and faces greater downside risks.

3. Nomura Securities predicts that the dollar is expected to strengthen in 2025.

4. BofA Global Research expects the dollar to remain strong in the first half of 2025, but then may depreciate due to growth concerns.

5. Ayesha Tariq, CFA (MacroMicro) predicts that the dollar will show a stronger trend in 2025.

6. Standard Chartered predicts that the dollar will weaken at the beginning of 2025 and then overall strengthen.

7. Cambridge Associates expects the dollar to strengthen at the beginning of 2025, but then moderately weaken.

2. Main Factors Affecting Dollar Fluctuations in 2025

1. Ayesha Tariq, CFA (MacroMicro) mentions that Trump's trade policies, higher tariffs, and stricter immigration policies may lead to inflation, thus affecting the dollar.

2. Nomura Securities believes that due to the continued high core inflation in the United States in 2025 and the further exacerbation of the US inflation situation by the elected President Trump's tariff policies, the Fed has to slow down the pace of interest rate cuts, which is conducive to the appreciation of the dollar.

3. Goldman Sachs believes that the policy combination adjustment under Trump's administration, the relative advantage of the US economy, and global capital inflows will support the dollar.

4. TradeXplore analyzed the impact of Trump's government policies, Trump's fiscal and tariff policies may push inflation higher, attracting funds to flow to the US dollar.

5. Bloomberg's survey shows that fiscal deficits and trade wars are the main risk factors for the dollar in 2025.

6. Standard Chartered believes that the surge in interest rates and the strengthening of the dollar since October 2024 may pose a challenge to economic growth, thus affecting the dollar.

7. Cambridge Associates points out that the slowdown in US economic growth, the Fed's interest rate cuts, and the continued overvaluation of the dollar may lead to a weaker dollar in 2025.

3.Expectations for US Treasury Yields

Considering the fluctuations of the dollar, here are some views from market institutions on the expected US bond yields in 2025:

1. Barclays Bank: Based on the prospect of a soft landing for the US economy in 2025, the 2-year and 10-year Treasury yields will close at 3.75% and 4.25%, respectively. However, considering the upcoming Trump administration, there is high uncertainty in the forecast. Tail risks include the rise in core inflation rates preventing interest rate cuts, and the cooling of the labor market leading to a reduction in deficits, which may affect 10-year Treasury yields to 5% or 3.25%. At the same time, it is expected that the Federal Reserve will end quantitative tightening at the beginning of 2025, and the net coupon issuance will decrease.

2. Dagong Global's opinion: Analyst Hai Feng said that considering factors such as economic growth and inflation expectations, the volatility of interest rates in 2025 will increase, especially with the cooperation of accommodative monetary policy, the 10-year Treasury yield will fluctuate around 2.00%, and short-term interest rates may be more aggressive, with a further downward trend.

3. Westpac Bank's opinipon: Economists from Westpac Bank said that the expansionary fiscal policies of governments around the world in 2025 will face rising bond yields, and the risk of interest rate cuts is now greater. They expect that the bond yields of developed economies have already risen significantly above pre-pandemic levels and expect this to continue.

4. T.Rowe Price seems more pessimistic than its peers with an expectation of up to 6% for the "global asset pricing anchor." Dutch bank ING believes that the 10-year US Treasury yield may reach 5% to 5.5% next year, while Franklin Templeton and JPMorgan expect it to reach 5%.

5. China International Capital Corporation's View: Aggressive fiscal policies may lead to increased issuance of government bonds, and revenue-raising measures such as increased tariffs could also push up inflation in the short term and disrupt the Fed's interest rate cut cycle. All of these factors could lead to a higher central tendency for US Treasury yields. Although the general direction of the US dollar may still be maintained with a downward trend followed by an upward trend in 2025, it is judged that the fiscal policies of Trump's administration could significantly raise the central tendency of fluctuations in the US Dollar Index, potentially keeping the index above 100 throughout 2025.

The content above is for reference only.

$USD/CNH (USD/CNH.FOREX)$ $USD/JPY (USD/JPY.FOREX)$ $USD/EUR (USD/EUR.FOREX)$ $USD/HKD (USD/HKD.FOREX)$ $USD/GBP (USD/GBP.FOREX)$

$Direxion Daily 20 Year Plus Treasury Bull 3x Shares(TMF)$ $iShares 20+ Year Treasury Bond ETF(TLT)$

$USD/CNH(USDCNH.FOREX)$ $USD/JPY(USDJPY.FOREX)$ $USD/GBP(USDGBP.FOREX)$

4. A tool for SG Tigers that you can use to make your investments more efficient.

Join now to open a CBA today and Enjoy SGD 20,000 for upcoming 0 Commision trading on US, HK, SGX Equities and ETFS. Find out more here.

Other helpful links:

• How to open a CBA.

• How to link your CDP account.

• Other FAQs on CBA.

• Cash Boost Account Website.

Like and subscribe to @Tiger_Contra . Never miss a beat in the market!