The dollar remained under pressure in Asian trading, with a strong U.S. GDP report failing to shift rate expectations, News.Az reports, citing Investing.com.
Investors are currently pricing in roughly two more Fed cuts in 2026.
“We expect the FOMC to compromise on two more 25 bp cuts to 3-3.25% but see the risks as tilted lower,” said Goldman Sachs Chief U.S. Economist David Mericle, citing slowing inflation as a key factor.
Against a basket of major currencies, the dollar fell to a 2½-month low of 97.767 and is on track to drop 9.9% for the year, marking its steepest annual decline since 2003.
The dollar’s volatility this year has been fueled by former President Donald Trump’s tariffs, which shook confidence in U.S. assets, and concerns over his influence on the Fed. HSBC analysts said in a report that the USD risk premium widened in December, suggesting that weakness may reflect worries about Fed independence as well as monetary policy.
Meanwhile, the euro rose to a three-month high of $1.1806 and is up more than 14% for the year, on track for its strongest annual gain since 2003. The European Central Bank’s decision to hold rates steady last week and revise growth and inflation forecasts upward has tempered expectations for near-term easing.
Other currencies also strengthened. The Australian dollar rose 8.4% to $0.6710, and the New Zealand dollar climbed 4.5% to a 2½-month high of $0.58475. Sterling reached a three-month peak of $1.3531, up more than 8% for the year, as investors bet on at least one Bank of England rate cut in the first half of 2026.
The Japanese yen remains in focus, with traders closely watching for possible intervention to curb its slide. Finance Minister Satsuki Katayama warned that Japan has full discretion to act against excessive yen moves. The yen strengthened 0.4% to 155.60 per dollar on Wednesday after her remarks, following a 0.5% gain in the previous session.
The Bank of Japan’s recent well-telegraphed rate hike left some market participants disappointed, keeping the yen under pressure. Analysts said thin year-end trading could make it an opportune time for Tokyo authorities to intervene in currency markets.
