The U.S. dollar gained traction against major global currencies on Tuesday, buoyed by stronger-than-expected retail sales data and market anticipation of Federal Reserve policy adjustments. The Commerce Department reported a 0.7% rise in November retail sales, surpassing forecasts, with motor vehicle and online purchases driving the increase.
Investors are closely watching the Federal Reserve’s upcoming decision, with a 25-basis-point rate cut widely expected at the conclusion of its two-day policy meeting on Wednesday. According to the CME’s FedWatch tool, futures markets are pricing in a 97% probability of such a move.
The U.S. dollar index, which measures the currency against six others, climbed 0.17% to 106.97, peaking at 107.08 earlier in the session. However, its performance varied against individual currencies. The dollar dipped 0.2% against the Swiss franc to 0.8927, while the euro slid 0.24% to $1.0488, reflecting a nearly 5% annual decline.
Market analysts suggest that the dollar’s strength reflects U.S. economic resilience. Marvin Loh, senior global market strategist at State Street, noted, “The market is debating whether it’s time to shift away from the dollar after its strong performance this year, but U.S. exceptionalism continues to support the currency amid global uncertainties.”
Meanwhile, the British pound edged higher to $1.2704 following data showing stronger-than-expected wage growth in the U.K., with the Bank of England’s rate decision looming. Similarly, the Japanese yen gained 0.42% to 153.52 against the dollar as markets revised expectations for a potential Bank of Japan rate hike to January.
Other currencies saw mixed performances. The offshore Chinese yuan declined 0.06% to 7.287 per dollar amid weak economic growth expectations in China. The Australian dollar dropped 0.6% to $0.6332, while Sweden’s krona and Norway’s krone weakened 0.76% and 0.56% against the greenback, respectively, ahead of central bank decisions in those countries.
Bitcoin also made headlines, briefly surpassing $108,000 before settling at $106,798, reflecting a 0.68% daily increase.
The diverging performances highlight ongoing investor caution as central banks worldwide weigh economic growth against inflation risks. With the Federal Reserve’s policy in focus, markets are navigating a complex environment of monetary adjustments and global economic uncertainty.
