Dollar Opens 2025 In Style

(RTTNews) - The U.S. dollar opened 2025 in style by gaining against the euro, the British pound as well as the Australian Dollar. The greenback also rallied against the Canadian Dollar, the Swiss franc as well as the Swedish Krona. It however declined against the Japanese yen in the opening week. The week ended January 3 also witnessed the 6-currency Dollar Index surge close to a percent.

The Dollar Index, a measure of the Dollar's strength against a basket of 6 currencies surged 0.88 percent during the week ended January 3. From the level of 108.00 on December 27, the DXY jumped to 108.95 in a week's time. The Dollar's strength, in the backdrop of stronger-than-expected labor market data reinforcing the Fed's hawkish stance, lifted the index from the low of 107.74 recorded on Monday to the multi-month high of 109.53 by Thursday.

The Dollar jumped on Thursday amidst initial jobless claims for the week ended December 28 dropping to 211 thousand, marking the lowest level of initial claims in eight months. Markets had expected it to increase to 222 thousand from 219 thousand in the previous week. The unexpected decline reinforced the resilience of the U.S. labor market and economy and portended a hawkish stance by the Federal Reserve.

Amidst the resurgent dollar and PMI data that revealed continued contraction, the euro plunged 1.14 percent against the U.S. dollar over the course of the week. Data released on Thursday had shown the HCOB Eurozone Manufacturing PMI at 45.1 in December, edging down from 45.2 in November. The sharpest decline in manufacturing activity in three months extended the ongoing two-year contractionary streak.

From the level of 1.0427 on the last Friday of December, the EUR/USD pair dropped to 1.0308 by January 3. The pair's trading range was slightly wider, between 1.0459 recorded on Monday and the 2-year low of 1.0224 touched on Thursday.

The British pound tumbled 1.26 percent against the Dollar during the week ended January 3. The GBP/USD pair slipped to 1.2420, from 1.2579 a week earlier. The week's trading range was between 1.2608 and 1.2351 amidst data that showed manufacturing PMI missing expectations.

According to S&P Global, manufacturing PMI dropped to 47 in December from 48 in November and firmly below the initial market expectations of 48.2. The readings revealed the fastest contraction in U.K. manufacturing activity in 11 months and triggered expectations of a favorable monetary policy stance from the Bank of England.

The Australian Dollar edged down against the U.S. Dollar during the week ended January 3. The AUD/USD pair dropped 0.05 percent, sliding to 0.6212 from 0.621 a week earlier in the backdrop of a larger-than-expected decline in the manufacturing PMI readings. The Australian Dollar ranged between $0.6248 and $0.6179 during the first week of 2024.

The yen rallied against the Dollar during the week ended January 3 fueled by fears of a potential rate hike by Bank of Japan. The USD/JPY pair dropped to 157.27, from 157.82 a week earlier. The 0.35-percent decline in the USD/JPY pair came after trading that ranged between 158.09 recorded on Monday and 156.01 recorded on Tuesday.

The week spanning January 6-10 is heavy on data releases, particularly the FOMC Minutes and the Non-farm payrolls data from the U.S. Also due during the week are preliminary inflation readings from Germany, France and Euro Area, services PMI and job openings data from the U.S., consumer confidence reading from Japan and unemployment rate from the Euro Area.

Amidst broad dollar weakness, the DXY has tumbled more than a percent to 107.79. The EUR/USD pair has increased to 1.0416 whereas the GBP/USD pair has strengthened to 1.2529. The AUD/USD pair is at 0.6293. The USD/JPY pair has decreased further to 156.66.