The dollar rises as the end-of-year holiday approaches.

The dollar index rose during trading on Tuesday, maintaining trading near its highest levels in two years, which it had recorded last Friday, following the hawkish comments from the Governor of the U.S. Federal Reserve at the bank's monetary policy conference held after the conclusion of the December meeting last Wednesday.

The Dollar Now

The dollar index DXY – which measures the performance of the American currency against a basket of 6 other major currencies – increased by 0.20% to record 108.299 points.

What Has Supported the Dollar in Achieving These Gains?

Investors are currently preparing for the start of the year-end holiday in most major global financial markets, and the U.S. dollar has maintained its gains due to the interest rate gap between the U.S. central bank and other central banks of major economies.

According to current market pricing, investor bets exclude the likelihood of a 25 basis point rate cut at the upcoming Federal Open Market Committee meeting scheduled for the end of next month, on January 28 and 29; the markets price the probability of a cut at only 9%, compared to 91% for the possibility of keeping interest rates unchanged.

The dollar showed a slight recovery this week after its sharp decline of 0.88% last Friday due to the weaker-than-expected U.S. Personal Consumption Expenditures Price Index report, which caused significant losses for the greenback as a result.

However, the dollar recovered thereafter, as investors balanced the greater impact of slowing the pace of rate cuts by the U.S. Federal Reserve, after Fed Chair Jerome Powell stated last Wednesday that the Federal Open Market Committee may slow the pace of rate cuts coinciding with the re-assumption of the presidency by elected President Donald Trump, and the potential implications of the tariffs he has pledged to impose on inflation rates in the country.

On the other hand, the dollar also received some support this week from the rise in U.S. Treasury yields yesterday, after Congress passed a temporary funding bill last Friday to avoid a government shutdown in the United States, which would have negatively impacted the U.S. economy.