Why Does the USD Look Strong but Is Actually Fragile?
As we approach December 26, 2025, the US dollar's movement presents an interesting yet questionable situation. Globally, the dollar remains under pressure after experiencing significant weakness throughout the year. The dollar index (DXY) is trending downward as markets become increasingly confident that the Federal Reserve will continue its interest rate cut policy. This expectation has driven down US bond yields, thus reducing the dollar's attractiveness as a high-yielding asset compared to other major currencies.
In terms of monetary policy, market sentiment remains dovish. Market participants believe the slowdown in several sectors of the US economy provides room for the Fed to more aggressively ease policy. Although other central banks have also eased, the market focus remains on the direction of US interest rates due to its dominant role in the global financial system. As long as these expectations of interest rate cuts persist, the dollar is likely to struggle to strengthen significantly.
US economic data itself is not entirely bad. Economic growth remains relatively solid, and several macro indicators are above expectations. However, the market appears less responsive to this positive data because the current main narrative is no longer economic strength, but rather the direction of the Fed's future policy. As a result, data releases that should have supported the dollar have had only a limited and temporary impact.
In Asia, including against the rupiah, the dollar fluctuated with a tendency to weaken slightly. Thin liquidity due to the Christmas holiday has kept price movements from being too aggressive, but relatively positive risk sentiment has encouraged regional currencies to hold their ground. As long as there are no major global shocks, pressure on the dollar in this region has the potential to continue.
Overall, the US dollar's fundamentals as of December 26, 2025, are leaning more neutral-bearish. The dollar could still receive temporary support from its safe-haven status in the event of market turmoil, but fundamentally, pressure from expectations of interest rate cuts and falling yields means the potential for USD strengthening appears limited in the short term. (az)
Source: Newsmaker.id
