Dollar rises after Maduro arrest as investors rush into US currency

Dollar strengthening

The spot US dollar index advanced as much as 0.3% to reach its highest since December 22. As the dollar gained, currencies of emerging markets came under pressure: the Mexican peso slid by 0.7%, while the euro declined by 0.3%.

Benchmark Treasury yields slipped one basis point, signaling increased demand for safe-haven assets.

Drivers of demand

As analysts note, the US dollar remains a key asset during periods of uncertainty.

Traders are gravitating to dollars as questions swirl about what's next for Venezuela after the US captured Maduro, and US President Donald Trump said Washington plans to "run" the South American country.

A raft of US reports due this week, including inflation figures and non-farm payrolls data, is also expected to shape the dollar's trajectory.

"Developments in Venezuela point to a relatively quick closure rather than a prolonged military conflict. While the episode preserves the bid for precious metals, for the USD, data plays a key role this week," analysts said.

US military operation in Venezuela

On January 3, Trump ordered strikes on Venezuela. US forces also captured and removed the country’s leader Nicolás Maduro.

Then, Trump said the US would run Venezuela until power is transferred.

Meanwhile, the Constitutional Chamber of Venezuela's Supreme Court ruled that Vice President Delcy Rodríguez will temporarily act as the head of state in the absence of Nicolás Maduro, detained by the US during the military operation.

Initially, Delcy Rodríguez stated that Venezuela would never become a colony of any country and called on the US to return President Nicolás Maduro.

Later, she scaled back the rhetoric, expressing readiness to cooperate with the US and inviting Washington to join a joint "cooperation program."

For more details on the military operation and why it is bad news for Russia, read the full report.