The US dollar achieves notable gains supported by positive unemployment claims data.

The US Dollar Index recorded a notable increase during trading on Thursday, benefiting from better-than-expected US unemployment claims data, which bolstered expectations for the Federal Reserve's continued tightening policy for a longer period. Below are the main factors impacting the dollar's movements today:

Positive Unemployment Claims Data Boosts Dollar Gains

Data released by the US Labor Department showed a decline in weekly unemployment claims compared to expectations, as new claims were only 211,000 during the week ending December 27, exceeding market expectations of 222,000 claims. The current reading was also lower than the previous week's data, which recorded 220,000 claims.

The continued improvement in unemployment claims for the third consecutive week contributed to boosting confidence in the performance of the US economy and strongly supported the dollar, as expectations rose that the Federal Reserve would keep interest rates high for a long period throughout 2025, while reducing the likelihood of significant rate cuts in the near term.

Interest Rate Expectations Support Dollar’s Rise

Expectations regarding monetary policy contributed to the performance of the Dollar Index today. According to the FedWatch tool, expectations indicate an 88.8% chance for the Federal Reserve to keep interest rates at 4.50% in the upcoming meeting, compared to a relatively low 11.2% chance for a rate cut of 25 basis points. These expectations enhance market confidence in the dollar’s continued strength.

Weak Bond Yields Limit Dollar Gains

Despite the gains, the dollar faced limited pressures due to a decline in US bond yields across various maturities, with the yield on the 10-year bond dropping to 4.551%, a decrease of 0.61%.

The yield on the 20-year bond also fell to 4.848%, while the yield on the 30-year bond remained steady at 4.776%. This decline in yields exerted pressure on the dollar's performance during some trading periods.

Dollar Index Performance

In light of these factors, the US Dollar Index rose by 0.40% to settle at 108.90 points during current trading. Investors are closely monitoring any economic updates that may impact the index's direction in the coming days.

Future Expectations for the Dollar Index

With the continued strength of US economic data and increasing expectations for the Fed to maintain its tightening policy, the US dollar may sustain its current momentum, while its movements could be influenced by other factors such as changes in bond yields or new statements from monetary policymakers.

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