The dollar is hovering near a two-year high, the yuan is under threat

The US dollar fell on Monday but remained close to its highest levels in more than two years, as traders are waiting for a set of economic data this week, the most important of which is the non-farm payrolls data to be released at the end of the week for more evidence of interest rate expectations on the part of the Federal Reserve.

A large number of Fed policymakers are scheduled to speak this week, where they are likely to repeat recent comments from their colleagues that the battle against taming inflation is not over yet.

Uncertainty over US President-elect Donald Trump's plans to impose huge import tariffs, tax cuts and immigration restrictions when he is inaugurated on January 20 also contributed to providing further support to the dollar during the previous period.

DXY

The US Dollar Index retreated but remained near levels, settling near its highest in more than two years as investors prepare for key labor market data next Friday, following Tuesday'S JOLTS report and Wednesday'S ADP Employment Survey.

In addition, several Fed officials are scheduled to speak this week, which will most likely confirm their cautious approach to lowering interest rates in 2025.

Current forecasts suggest interest rates will be cut by only a quarter of a point this year, a significant reduction from the 100 basis points expected in September.

USDCAD

In Canada, a source told Reuters that Prime Minister Justin Trudeau is likely to announce his intention to step down, although he has not made a final decision to do so.

But it seems that the markets have largely taken this into account and may welcome the elections to clarify things, and this has led to the Canadian currency's rise against the US dollar so far.

USDCNY

The Chinese yuan weakened at the end of the week, especially on Friday, surpassing the psychological level of 7.3 against the dollar in the local market for the first time in 14 months, after the people's Bank of China strongly defended this key level throughout last December.

However, the Chinese yuan has fallen domestically to its lowest level in 16 months now.

AUDUSD & NZDUSD

The Australian dollar and the New Zealand dollar, which are often used as liquid proxies for the yuan, were not affected by Friday's downward move in the Chinese currency, trading almost 0.2% higher in the Asian session.