USD - Recent Performance
The US dollar has stabilized since September having tumbled in the first eight months of the year. Within the September-December period, EUR/USD, for example, pulled back from levels above 1.20 to the mid-1.17s and USD/CAD climbed into the mid-1.28s, from the mid-1.20s. Against the Japanese yen, the dollar traded in the first week of December above 113, having been below 108 in September.
A better-than-expected US payrolls number in December affirmed investor expectations for future US interest rate hikes in December 2017 and March of 2018.
Interest rates are the principal driver of foreign exchange rates but the dollar has also been supported in recent months by Donald Trump’s planned tax cuts, which are expected to boost the US economy.
In a note to clients in December, Dutch bank ING predicted that the dollar would weaken throughout 2018. The bank forecast EUR/USD at 1.30 before 2018 was done, representing a 9.5% depreciation in the dollar's value from December 2017 rates.