The U.S. dollar has experienced its most significant annual surge in nine years, fueled by a resilient U.S. economy and expectations that the Federal Reserve will slow its pace of rate cuts next year. Added to this, tariff threats from President-elect Donald Trump have further supported the dollar’s strength.

According to Bloomberg on the 28th, the Bloomberg Dollar Spot Index, which measures the dollar’s value against ten major currencies, has risen 7.4% this year through the 27th. This marks the largest increase since 2015 when the index climbed 9.0%. After gains of 4.8% in 2021 and 6.2% in 2022, the index saw a decline of 2.7% last year, only to rebound strongly in 2023.

As central banks worldwide have lowered interest rates to counter slowing economic growth, all major currencies of advanced economies have weakened against the dollar. The Japanese yen, Norwegian krone, and New Zealand dollar have each fallen over 10% against the dollar, making them the weakest performers among the G10 currencies. Meanwhile, the euro has declined by 5.5%, trading at $1.04 per euro.

Barclays currency strategist Skylar Montgomery noted, “The backbone of this year’s dollar strength has been the robust U.S. economy. This has allowed the Fed to cut rates less aggressively, keeping U.S. rates higher than those of other countries, which has historically supported the dollar.”

The dollar’s value reached a two-year high earlier this month after the Fed reduced its benchmark interest rate by 0.25 percentage points and scaled back its 2024 rate cut projection from 1 percentage point to 0.5 percentage points.

Looking ahead, Wall Street analysts see potential for further dollar gains. Bloomberg reported that speculative traders have increased their bets on dollar strength ahead of the U.S. presidential election, with such contracts now totaling approximately $28.2 billion—the highest since May.

Goldman Sachs analyst Kamakshya Trivedi emphasized in a memo on the 20th that the current dollar strength does not fully account for Trump’s promised tariff measures, suggesting the dollar could rise further in the medium term.