The US dollar is on track for its best performance in nearly a decade. Economic resilience and policy expectations are key drivers.

With the strong resilience of the US economy and the suppression of market expectations of a rate cut cycle by the Federal Reserve, as well as Trump's threats to implement harsh tariffs, the dollar is heading towards its best performance in nearly a decade. The Bloomberg Dollar Spot Index has risen more than 7% so far this year, marking its best annual performance since 2015. All currencies of developed countries have depreciated against the dollar, as other central banks are forced to adopt loose policies to support their local economies. "The main factor supporting the dollar this year is the strong performance of the US economy," said Barclays forex strategist Skylar Montgomery Koning. "This economic strength makes the Fed lean towards a shallower rate cut cycle, keeping US rates higher than other regions and helping the dollar maintain historic highs." Earlier this month, the dollar index touched its highest level in over two years, when the Fed cut rates but hinted at a slower pace of easing. Nevertheless, Wall Street is still betting on further upside for the dollar by 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 major developed country currencies, the yen, Norwegian krone, and New Zealand dollar have recorded the biggest declines against the dollar, all exceeding 10%. The euro has dropped by around 5.5%, currently trading near 1.04 dollars, with more analysts predicting that the euro may reach parity with the dollar next year. The Bloomberg Dollar Spot Index edged up slightly on Friday, posting its fourth consecutive weekly gain, while long-term US bond yields rose as traders assessed the Fed's monetary policy path and the upcoming policies of the incoming Trump administration. Non-commercial speculative traders have steadily increased their bullish bets on the dollar around the US election. Currently, they hold about $28.2 billion of 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 priced in our tariff expectations, and the forecast risk still tends to be on the upside in the medium term. Especially if stronger market sentiment can more sustainable US economic growth, even in the face of more protectionist measures."