Dollar Weakens at the Start of 2026!
The US dollar started 2026 weakly on Friday (January 2), after being under pressure against most global currencies throughout 2025. The main reason: the narrowing interest rate differential between the US and other countries, which has reduced the dollar's attractiveness.
Early in the Asian session, the euro stabilized around $1.1752 after surging 13.5% throughout 2025. The pound sterling also held steady around $1.3474 after rising 7.7% last year. Both recorded their sharpest annual gains since 2017.
In contrast to the euro and pound, the Japanese yen traded flat at around 156.74 per dollar, near its weakest level in 10 months. The yen briefly touched 157.90 in November, sparking market concerns about potential intervention from Tokyo, despite strong warnings from Japanese authorities throughout December that kept the yen out of the "intervention zone."
With Japanese and Chinese markets closed, Asian trading volumes are expected to be thin, so movement is likely to be limited. However, market participants are still monitoring this month's economic data to gauge the direction of interest rates, particularly in the US.
The dollar index hovered around 98.243 after recording a 9.4% decline through 2025—its deepest drop in eight years. Pressure stems from expectations of interest rate cuts, perceived inconsistent trade policies, and market concerns about the Fed's independence under the Trump administration.
The next major focus will be US data such as payrolls and job losses next week, as well as Trump's pick for the next Fed Chair, as Jerome Powell's term ends in May. The market expects the replacement candidate to be more dovish and cut interest rates more aggressively; traders expect two cuts this year, while the Fed's internal projections are more cautious. Meanwhile, the Australian and New Zealand dollars opened the year on a positive note: the AUD edged up to $0.66805 (after nearly 8% in 2025), while the NZD held steady at $0.5755 after posting a speculative gain of around 3%.
5 key points
- The dollar started 2026 weak after a sharp decline in 2025.
- Euro $1.1752 (+13.5% 2025) & sterling $1.3474 (+7.7%) were big winners.
- Yen 156.74 near 10-month low; risk of Japanese intervention remains looming.
- Dollar index around 98.243, down 9.4% in 2025 (worst in 8 years).
- Markets await US jobs data and Powell's replacement—key to interest rate and dollar direction. (asd)
Source: Newsmaker.id
