The dollar extended its gains as a strong performance from the world's largest economy prompted traders to trim expectations for the size of expected interest rate cuts.

On Monday, the dollar spot index rose as much as 0.6 percent to its highest level since Nov. 17, while the euro and the yen fell to their lowest levels since November. Since the beginning of 2024, the dollar has strengthened against all 10 major currencies.

Solid US macro data, including last week's surprisingly strong jobs report, is pushing back expectations for the first rate cut, while global forces ranging from the economic woes of Asian giants to geopolitical uncertainty are boosting the dollar's appeal as a safe haven currency.

"The dollar has a lot going for it right now and it's hard to short." "If the economy continues to show good data, that pattern could change and we may need to reassess the dollar from a more bullish perspective," said Brad Bechtel, global head of foreign exchange at Jefferies.

This strength and the prospect of rates staying on hold for an extended period of time has helped the dollar rally from its December 2023 lows, when the Fed signaled the central bank was ready to move away from rate hikes and consider a series of rate cuts.

Fed officials confirmed the end of an aggressive campaign to push up interest rates at their January meeting, seeking to reset expectations for when and how quickly the central bank will cut rates in 2024 as inflationary pressures wane. Fed Chairman Jerome Powell said after the decision that a rate cut in March was unlikely.

Euro zone policymakers are also cracking down on talk of a near-term rate cut. But expectations that ECB policymakers could lower borrowing costs before the Fed, perhaps in April or even earlier, have put pressure on the euro, which fell 0.5 percent on Monday to its lowest level since Nov. 14.

The prospect of wider interest rate differentials in favor of the United States has been dragging down the euro, which has depreciated 2.8% against the dollar since the start of 2024.

The Japanese yen, meanwhile, is the worst performing G10 currency so far in 2024, down more than 5 percent, as the Bank of Japan stuck to its loose monetary policy with no clear timetable for change. It fell 0.3% to 148.89 against the dollar on Monday.

"Dollar bulls have more reasons to cheer than U.S. exceptionalism and high yields," Saxo market strategist Charu Chanana wrote in a note Monday. "Friday's explosive non-farm payrolls report, combined with Fed Chair Jerome Powell's pushback against expectations of a rate cut in March, will force the market to reassess expectations for the Fed."

According to CME's Fed Watch, there is an 83.5 percent chance that the Fed will hold rates steady at 5.25 percent to 5.50 percent in March, and a 16.5 percent chance that the Fed will cut rates by 25 basis points. The probability of keeping rates unchanged by May is 35.8%, the probability of a cumulative 25 basis point cut is 54.8%, and the probability of a cumulative 50 basis point cut is 9.4%.