Dollar Stable, Aussie Accelerates in Early 2026
The US dollar started the first trading day of 2026 relatively stable, as US government bonds also tended to move subdued. The Bloomberg Dollar Spot Index remained virtually unchanged after rising for four consecutive sessions, although the dollar overall fell 8.1% throughout 2025 and around 1.2% in December.
The market spotlight came from the Australian dollar (AUD), which was the strongest among the G10 currencies. The AUD strengthened due to a combination of rising Australian bond yields and supportive risk sentiment, coupled with a boost from rising gold and silver, which continued their best annual performance since 1979. Aluminum even reached $3,000/ton, its highest in more than three years.
From the US side, the S&P Global US Manufacturing PMI data came in at 51.8 (in line with expectations), signaling continued expansionary manufacturing activity. However, market participants still believe the dollar's direction will be largely determined by Fed policy. Market strategist Marc Chandler believes the dollar's primary driver is Fed policy and expects two to three interest rate cuts this year as the economy slows.
Meanwhile, the euro and the Canadian dollar lagged. EUR/USD weakened slightly after weaker-than-expected Eurozone manufacturing data, while USD/CAD strengthened slightly as Canada's manufacturing PMI remained in contraction. In Asia, USD/JPY held steady around 156.70, with Japanese markets closed for a holiday.
Source: Newsmaker.id
