Global Dollar Shakes, Markets Already Looking to 2026
The US dollar weakened ahead of the Thanksgiving holiday and is heading for its biggest weekly decline in at least four months. Markets are starting to project the outlook to 2026, assuming that the global interest rate cutting cycle is nearing its end, while the US is still expected to continue easing. The US dollar index is now down about 1% from its six-month peak reached last week, as market participants shift their focus to future monetary policy rather than current interest rate levels.
Meanwhile, several major central banks are shifting their tone to a more hawkish tone. The Bank of Korea reduced its easing bias, pushing bond prices lower. In Japan, former Bank of Japan board member Asahi Noguchi reiterated the call for gradual interest rate hikes, echoing similar signals from other BoJ policymakers. Meanwhile, the Reserve Bank of New Zealand effectively ended its cutting cycle at its most recent meeting, and the New Zealand dollar (kiwi) has strengthened nearly 2% since the decision.
The market now expects a US interest rate cut of around 90 basis points by the end of 2026, compared to projections of around 75 basis points in Japan and 40 basis points in New Zealand. Although interest rates in both countries remain well below those in the US, the foreign exchange market is forward-looking: policy direction is key to exchange rate movements as investors seek the best returns. In Australia, rising inflation expectations have pushed 3- and 10-year bond yields to their highest levels among G10 countries, but the Australian dollar has remained within the same range as it has for the past 18 months, awaiting new triggers—including the possibility of a sharp rise in the Chinese yuan.
In Europe, markets await the release of eurozone consumer confidence data and ECB meeting minutes, which could provide further clues to the direction of interest rates in the region. On the geopolitical front, commodity traders are monitoring developments in the Ukraine peace deal talks, after Russia dismissed the possibility of major concessions following the leak of a conversation between a senior Kremlin aide and US envoy Steve Witkoff. With the US stock and bond markets closed on Thursday and open for only a half-day on Friday, movement in this weekend's session is expected to be light, but still full of signals for the dollar's direction in the coming weeks.(asd)
Source: Newsmaker.id
