The US dollar is heading towards its best performance in nearly a decade, with economic resilience and policy expectations as key drivers

According to the Zhitong Finance APP, as the U.S. economy demonstrates strong resilience, suppressing market expectations for a Federal Reserve rate cut cycle, and with Trump threatening to implement severe tariffs, the dollar is on track for its best performance in nearly a decade. The Bloomberg Dollar Spot Index has risen over 7% so far this year, marking its best annual performance since 2015. All currencies of developed countries have depreciated against the dollar, as central banks in other countries are forced to adopt easing policies to support their local economies. "The main factor supporting the dollar this year is the strong performance of the U.S. economy," said Barclays foreign exchange strategist Skylar Montgomery Koning. "This economic strength makes the Federal Reserve inclined towards a shallower rate cut cycle, keeping U.S. interest rates higher than other regions, which helps the dollar maintain historic highs." Earlier this month, the dollar index reached its highest level in over two years when the Federal Reserve lowered interest rates but hinted at slowing the pace of easing. Nevertheless, Wall Street continues to bet on further gains for the dollar in 2025. However, global economic growth may improve later in 2025, which could support other currencies and put pressure on the dollar. As of December 27, among developed country currencies, the Japanese yen, Norwegian krone, and New Zealand dollar have seen the largest declines against the dollar, all exceeding 10%. The euro has fallen about 5.5% and is currently trading around 1.04 dollars, with an increasing number of analysts expecting the euro to reach parity with the dollar next year. The Bloomberg Dollar Spot Index rose slightly on Friday, marking its fourth consecutive week of gains, while long-term U.S. Treasury yields increased as traders assessed the Federal Reserve's monetary policy path and the policy direction of the incoming Trump administration. Non-commercial speculative traders have steadily increased their bullish bets on the dollar before and after the U.S. election. Currently, they hold about $28.2 billion in related contracts, the highest level since May. Goldman Sachs analyst Kamakshya Trivedi wrote in a report on December 20: "The current strength of the dollar is consistent with the latest data. We believe the market has not fully digested our tariff expectations, and from a medium-term perspective, the forecast risks still lean upward. Especially if stronger market sentiment can translate into more sustainable U.S. economic growth, even in the face of more protectionist measures."