Investing.com – The U.S. dollar fell slightly on Monday as U.S. bond yields fell, but remained near recent highs as the end of the year approached.

At 04:55 ET (09:55 GMT), the Dollar Index, which tracks the dollar against a basket of six other currencies, was trading 0.1% lower at 107,690.

However, the index continued to stay on track, posting monthly gains of more than 2%, taking its year-to-date gain to almost 7%.

The dollar is on course for significant annual gains

The dollar is supported by rising U.S. Treasury yields, with the benchmark 10-year note hitting its highest level in more than seven months last week. On Monday, however, the yield dropped to 4.599%.

The election of Donald Trump as the fresh president has also strengthened the dollar as his policies of looser regulation, tax cuts, tariff increases and tighter immigration are seen as both pro-growth and inflationary, which will likely keep the Federal Reserve from cutting interest rates quickly next year.

At its last policy meeting this year, the U.S. central bank projected just two 25-basis-point rate cuts in 2025, and markets are currently pricing in only about 35 basis points of rate easing in 2025.

Trading ranges are likely to be narrow this holiday week, with attention focusing on weekly data on Thursday and data the day after, as well as comments from the FOMC member.

The euro gains after Spanish inflation

In Europe, it rose 0.1% to 1.0439, recovering slightly after data showed the EU’s annual harmonized rate in Spain rose to 2.8% in December, compared with a figure of 2.4% recorded in November.

Interest rates were cut earlier this month and signaled there would be further cuts in the future as economic growth stagnates in the region.

However, another rate cut could come later after the recent rise in inflation, ECB Governing Council member Robert Holzmann said on Saturday.

accelerated to 2.2% in November from 2.0% a month earlier and above the ECB’s target rate of 2%.

was trading 0.1% higher at 1.2595, with little UK macroeconomic data likely to be released before Thursday’s release.

This is expected to show that the country’s manufacturing sector continued to contract sharply in December, after data showed the British economy failed to grow in the third quarter.

At a meeting earlier this month, Bank of England policymakers voted 6-3 to keep interest rates unchanged, a more dovish split than expected that suggests continued interest rate cuts next year.

Yen remains frail; risk of intervention support

In Asia, the pair was largely unchanged at 157.76, around five-month highs for the pair, with only the risk of Japanese intervention preventing another test of the 160 level last seen in July.

The council signaled it would take time to consider further interest rate increases after the central bank left interest rates steady at 0.25% at this month’s meeting.

rose 0.2% to 7.3136, remaining near a one-year high, as the prospect of greater fiscal spending and looser monetary conditions in the coming year weighed on the currency.