Dollar rises as Trump calls for BRICS to abandon alternative currencies

The dollar surged again on Monday, with the outlook for potential U.S. rate cuts becoming a focal point in what is expected to be a critical week.

The currency received verbal backing from U.S. President-elect Donald Trump, who surprised markets with a shift in tone, News.Az reports, citing Reuters.

In a surprise change of tone, Trump on Saturday demanded that BRICS member countries commit to not creating a new currency or supporting another currency that could replace the dollar or face 100% tariffs.

That marked a shift from his prior advocacy of a weaker dollar to fight trade wars and the Chinese yuan quickly slipped to a three-month trough at 7.2662 pre dollar, while the Indian rupee hit record lows.

Political uncertainty in France added to pressure on the euro which slipped 0.4% to $1.0532, after bouncing 1.5% last week and away from a one-year trough of $1.0425.

That saw the dollar index edge up to 106.170, having closed out November with a gain of 1.8% even after a setback last week.

"Given the continued resilience of the U.S. economy and a worsening outlook elsewhere, we don't think this is the start of a deeper setback for the dollar," said Jonas Goltermann, deputy chief markets economist at Capital Economics.

"But the bar for a further shift in expected interest rates in favour of the U.S. in the near term is quite high," he added. "A period of consolidation into year-end looks to us like the most likely scenario, although the risks remain skewed in favour of the dollar over the course of 2025."

Key to the outlook for rates will be the November payrolls report due Friday where median forecasts favour a rise of 195,000 following October's weather and strike-hit report, which could also be revised given a low response rate for that survey.

The jobless rate is seen edging up to 4.2%, from 4.1%, which should keep the Federal Reserve on course to cut by 25 basis points on Dec. 18.

Markets imply a 65% chance of such an easing, though they also only have two more cuts priced in for all of 2025.

A host of Fed officials are due to speak this week, including Fed Chair Jerome Powell on Wednesday, while other data include surveys of manufacturing and services.

News.Az