Forex Today: US Dollar holds near multi-year highs to begin 2025
Here is what you need to know on Thursday, January 2:
The US Dollar (USD) Index gained more than 2.5% in December and closed the third consecutive month in positive territory. The index stays in a consolidation phase slightly below the 26-month top it touched above 108.50 on the last day of 2024. The US economic calendar will feature weekly Initial Jobless Claims and the Challenger Job Cuts data for December.
US Dollar PRICE Last 30 days
The table below shows the percentage change of US Dollar (USD) against listed major currencies last 30 days. US Dollar was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.32% | 0.98% | 4.80% | 2.36% | 4.16% | 4.83% | 2.11% | |
| EUR | -1.32% | -0.34% | 3.44% | 1.02% | 2.80% | 3.45% | 0.78% | |
| GBP | -0.98% | 0.34% | 3.79% | 1.37% | 3.15% | 3.81% | 1.12% | |
| JPY | -4.80% | -3.44% | -3.79% | -2.36% | -0.64% | -0.02% | -2.60% | |
| CAD | -2.36% | -1.02% | -1.37% | 2.36% | 1.77% | 2.41% | -0.25% | |
| AUD | -4.16% | -2.80% | -3.15% | 0.64% | -1.77% | 0.64% | -1.97% | |
| NZD | -4.83% | -3.45% | -3.81% | 0.02% | -2.41% | -0.64% | -2.59% | |
| CHF | -2.11% | -0.78% | -1.12% | 2.60% | 0.25% | 1.97% | 2.59% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Wall Street's main indexes declined sharply heading into the new year, boosting the USD. Early Thursday, US stock index futures trade in positive territory, pointing to an improving risk mood.
EUR/USD lost about 0.5% on Tuesday and closed the month of December below 1.0400. The pair trades in a tight channel above 1.0350 in the European morning on Thursday. Revisions to December HCOB Manufacturing PMI data for the Eurozone and Germany will be released later in the session.
GBP/USD closed in negative territory on Monday and Tuesday. The pair holds steady above 1.2500 early Thursday.
During the Asian trading hours, the data from China showed that the Caixin Manufacturing PMI declined to 50.5 n December from 51.5 in November, missing the market expectation of 51.7. Despite this disappointing reading, AUD/USD edges higher on Thursday and was last seen rising nearly 0.5% on the day at 0.6215.
Gold stretched lower ahead of the New Year holiday but managed to stabilize above $2,600. XAU/USD holds its ground and trades above $2,630 to start the European session.
After reaching its highest level since July above 158.00 following the Christmas break, USD/JPY corrected lower toward the end of the year. The pair stays on the back foot in the European morning and was last seen losing about 0.3% on the day below 157.00.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
