The Bloomberg Dollar Index extended its gains for the sixth straight week, marking the longest winning streak since early September.
The index rose 0.2% in the week ending yesterday, February 9, bringing its 6-week rise since the beginning of the year to 2.4%. The Intercontinental Exchange's dollar index advanced in five of the past six weeks, taking its 2024 gain to 2.7%. The gains come after a 5% decline in November and December.
Financial markets have trimmed their bets on monetary easing in 2024 following a strong January jobs report, as well as clear messaging from Federal Reserve Chairman Jerome Powell and his colleagues that a March rate cut is not on the table.
In trading yesterday, Friday, 2-year and 5-year Treasury yields rose to their highest levels in 2024. Ten-year bond yields were less than one basis point away from the peak of the year so far.
“Our bullish outlook for the dollar is driven by continued growth in the US and exceptional returns,” JP Morgan analysts led by Meera Chandan, Arindam Sandelia and Patrick Locke wrote in a report on Friday.
They added: These expectations have not changed. They also noted that the Fed's dovish pivot is not enough to drive long-term dollar weakness, because easing cycles across many of the world's major central banks appear largely in sync.
On the other hand, Donald Trump's strong performance in the Republican primaries points to the November elections as an important risk factor pushing the dollar higher.
The US bank concluded by saying: We still see a strong case for the US dollar to remain flexible in the first half.
