US Dollar advances as year-end caution lingers

• DXY trades near 107.90 on Friday on a tight range.
• Trading desks remain short-staffed contributing to a muted trading.
• Holiday momentum keeps Dollar elevated as 2025 comes to an end.

The US Dollar Index, which measures the value of the USD against a basket of currencies, is trading within a very tight range on Friday, holding near 108.00 mark. Markets remain cautious, and thin year-end trading conditions limit volatility. Incoming data from Japan and China hinted at further industrial slowdown, but the Greenback's buoyancy persists. Despite profit-taking after last week's gains, the US Dollar continues its climb as traders return from Christmas holidays.

Daily digest market movers: US Dollar eyes robust growth outlook

• Government shutdown risks rise after House Republicans failed to pass a funding deal. Historically, short shutdowns have limited economic fallout, and Treasury has room to maneuver before any default risk escalates.
• Longer-term yields keep climbing. The 10-year Treasury yield hovers near 4.60%, and the 30-year stands at 4.77%, both testing highs not seen since May.
• The US Dollar stands on track for a near 7% annual gain as traders anticipate robust US growth and limited rate cuts in 2025, as Fed Chair Jerome Powell signals caution on further easing.
• Chinese stimulus measures and deposit rate cuts have supported local markets, but the Dollar shrugs off these developments, remaining broadly bid into year-end.

DXY technical outlook: Indicators hold upward traction

The Dollar Index maintains its bullish momentum, with indicators pointing higher and nearing overbought levels. Despite thin trading liquidity, the DXY keeps inching upward near 108.00, reflecting continued buying interest. As long as the index remains above 106.00, the technical picture stays positive.