The US dollar was buoyed by a rise in Treasury yields on Thursday, putting pressure on the pound and euro, while the yen rose from recent lows. Markets are awaiting clarity on possible tariffs by President-elect Donald Trump.
The focus in 2025 will be on Trump’s agenda when he returns to the White House on January 20, with analysts expecting his policies to support growth but also increase price pressures.
CNN reported on Thursday that Trump is considering declaring a national economic emergency to justify sweeping tariffs on allies and adversaries. On Monday, the Washington Post said Trump is considering more detailed tariffs, something he later denied.
Concerns that Trump’s policies could reignite inflation have pushed up bond yields, with the yield on the 10-year US Treasury note hitting 4.73% on Wednesday, the highest since April 25. On Thursday, the yield was at 4.6628%.
“Trump’s shifting narrative on tariffs is clearly having an impact on the USD. It looks like this is something the market will have to adjust to over the next four years,” said Kieran Williams, Head of FX Asia at InTouch Capital Markets.
The sell-off in the bond market has driven the dollar’s strength, which has outperformed other currencies.
The pound, one of the best performers against the greenback in recent years, has fallen 1.9% in three days.
Sterling fell to $1.2239 on Thursday, its lowest since November 2023, even as UK government bond yields hit multi-year highs. The pound was last down about 0.64% at $1.2285.
Higher government bond yields, which mean investors want a higher return for their risk, would normally support the pound.
With confidence in Britain’s fiscal outlook eroding, the sell-off in the UK government bond market resumed early on Thursday before recovering slightly.
The euro also fell, albeit less than the pound, to $1.0298, close to a two-year low of $1.0224 hit last week. Most currency analysts expect the euro to reach parity with the dollar by 2025.
The yen strengthened 0.39% on the day and was last at 157.72 per US dollar, although it is still close to the 160 per US dollar level that prompted Tokyo to intervene in July.
