The USD began 2026 in a weakening state, extending the sharp decline of the previous year when the interest rate gap between the US and major economies gradually narrowed. Meanwhile, the Japanese yen continued to stagnate near the 10-month bottom, while the global currency market temporarily calmed down due to low liquidity at the beginning of the year.
In Asia, the euro remained around the $1,175 mark after increasing by more than 13% in 2025 - the strongest increase since 2017. The British pound also anchored high at $1,347, marking the best year of growth in nearly a decade.
Conversely, the Yen only increased by less than 1% in the past year and still fluctuated close to the zone that once made Japanese officials worried about intervention. Although strong warnings from Tokyo somewhat curbed the decline, pressure on the yen remained present.
The USD Index is currently at 98.24 points, after falling more than 9% in 2025 - the sharpest drop in 8 years. The greenback is under pressure from US Federal Reserve (Fed) interest rate cuts, unpredictable trade policy and concerns about the independence of US central banks.
Investors are currently focusing their attention on a series of upcoming US economic data, especially the jobs report, to assess interest rate outlook for this year. At the same time, President Donald Trump's choice of a new Fed Chairman to replace Jerome Powell is also considered a key factor affecting the market.
Many investors predict the Fed may cut interest rates twice in 2026, higher than officially expected. Goldman Sachs warns that the risk of monetary policy continues to lean towards easing, amid growing concerns about the Fed's independence.
In the opposite direction, commodity currencies such as Australian and New Zealand dollars started the year quite positively. AUD alone increased by nearly 8% in 2025 - the strongest increase since 2020, showing that global risk sentiment is still maintained.
