Dollar's Dominance: How Trade Deals and Economic Resilience Boost the U.S. Currency

The U.S. dollar is set to achieve its first monthly gain in 2025 against major currencies, buoyed by a robust U.S. economy and easing trade tensions. On Thursday, the dollar climbed against the yen, reaching its highest level since late May, and is poised for a 5% rise in July, the largest since December 2024.

The Bank of Japan held its short-term interest rates steady at 0.5% and raised its inflation forecast, following the Federal Reserve's decision to keep U.S. interest rates unchanged. Fed Chair Jerome Powell indicated no rush to cut rates despite pressure from President Donald Trump. The dollar's strength is attributed to the Fed's hawkish policies and reduced uncertainty from trade deals.

The euro has suffered due to the dollar's strength, falling nearly 3% this month. The EU's trade concessions to the U.S. have injected a reality check into European markets. In other moves, Trump imposed a 50% tariff on Brazilian goods while negotiating with India, South Korea, and other trade partners, affecting global currency reactions.

(With inputs from agencies.)