The euro dipped toward $1.17 at the start of 2026 after a remarkable 13.5% surge against the dollar in 2025, its strongest annual gain since 2017. Investors remain focused on fresh catalysts, particularly interest rate expectations in the Eurozone and the US. The ECB indicated rates are likely to stay on hold for now, citing resilient economic growth and inflation close to target, with President Christine Lagarde highlighting that high uncertainty makes forward guidance challenging. In the US, markets are anticipating President Donald Trump’s nomination of a new Fed chair to succeed Jerome Powell in May, raising the possibility of a more dovish policy stance. The Fed cut the federal funds rate by 25 basis points to 3.50%-3.75% in December, completing a total of 75 bps of reductions in 2025 amid a cooling labor market and moderately elevated inflation. Investors are now pricing in two additional rate cuts in 2026, a move that could pressure the dollar and further support the euro.

Euro Softens to $1.17 as Markets Eye Interest Rate Outlook

The Indian rupee weakened past 90 per dollar on Friday, extending losses from the previous session to start the new year on the back foot, as persistent dollar demand outweighed the Reserve Bank’s intervention. State-run banks continued dollar sales on behalf of the central bank to support the currency but could not prevent a breach of the 90 mark. Underlying demand remained strong, driven by foreign banks handling custodial flows and large importer payments, while foreign investors started the year as net sellers of Indian equities. The country’s economic activity also slowed in December, with manufacturing PMI growth hitting a two-year low. The rupee lost roughly 5% in 2025, making it the worst-performing Asian currency, pressured by steep US tariffs and weak investment flows. Its trajectory in 2026 will largely hinge on developments in a potential US–India trade deal and foreign portfolio investor activity, which could reshape the dollar flows that weighed on the currency last year.

Indian Rupee Starts 2026 Weak

The Indonesian rupiah weakened toward IDR 16,720 per dollar on Friday, the first trading day of 2026, reversing gains from the prior three sessions and tracking broader losses across Asian currencies. Renewed expectations of lower domestic interest rates weighed on sentiment, after Bank Indonesia signaled scope for further easing this year amid mild inflation and efforts to support growth following the late-November Sumatra disaster. BI kept its key rate at 4.75% in December for a third straight meeting, after cumulative cuts of 150bps between September 2024 and September 2025. For 2025, the rupiah fell about 4%, ranking among Asia’s weakest currencies. Focus now shifts to December inflation data due next week, after recent figures hovered near an 18-month high despite staying within BI’s 1.5%–3.5% target range. Globally, the U.S. dollar fell to near 98.2 after a 9% decline in 2025, pressured by tariff uncertainty, Fed easing expectations, and fiscal concerns.

Rupiah Opens 2026 Lower Amid Rate-Cut Bets

The offshore yuan steadied around 6.97 per dollar on Friday, but traded at its strongest since May 2023, defying weaker central bank guidance as exporters continued selling dollars. The currency also recorded its largest annual gain since 2020, rising roughly 5% for 2025 to snap its three-year losing streak. The yuan’s rapid advance has prompted the central bank to prevent the yuan from overshooting through softer guidance rates and verbal warnings in state media, but has been unable to reverse the currency’s strengthening trend. Exporters’ ongoing conversion of foreign currency into yuan, driven by payments and administrative requirements, has likely continued into early January. The yuan’s strength was also underpinned by signs of restored confidence in the Chinese economy after data showed a better-than-expected performance in December’s manufacturing activity. A broadly weaker dollar added further support as the Federal Reserve’s policy stance on lowering rates became clearer.

Yuan Remains Strong to Start the Year

The South Korean won hovered around 1,440 per dollar as authorities continued efforts to stabilize the currency following last year’s record lows. BOK Governor Rhee Chang-yong noted the won remains “misaligned” with economic fundamentals, warning that persistent depreciation could heighten inflation and weigh on domestic-oriented firms. The central bank and government have deployed measures to support the currency, including easing rules on banks’ foreign currency liquidity, offering temporary tax exemptions, and executing strategic hedging amid ongoing overseas stock purchases by local investors and US-led AI capital flows. At the same time, strong trade performance is supporting the currency. South Korea’s exports reached a record $709.7 billion in 2025, with led by semiconductors up 22.2% to $173.4 billion and automobiles at $72 billion. December alone generated a $12.2 billion trade surplus, contributing to FX inflows.

South Korean Won Steadies Amid BOK Interventions

The Japanese yen stabilized around 156.6 per dollar on Friday after two consecutive sessions of losses, though it remained near ten-month lows, intensifying calls for intervention. Tokyo’s verbal warnings last month briefly kept the yen out of the intervention zone, with Finance Minister Katayama emphasizing Japan’s freedom to act against excessive moves, though worries over further weakening persist. Japan’s business lobby leaders have now urged the government to address the weakening yen and support a stronger currency. The country’s expansive fiscal policy remained a source of concern, with public debt already exceeding twice the size of the country’s economy. The cabinet recently approved Prime Minister Takaichi’s record 122.3 trillion yen budget, seeking to balance aggressive spending with debt management by curbing new bond issuance. The yen ended 2025 with a modest 0.3% gain, snapping a four-year losing streak after two rate hikes this year.

Japanese Yen Stabilizes

The US dollar fell to around 98.2 on the first trading day of 2026, building on its steepest annual loss in eight years. The greenback shed about 9% last year, weighed down by policy uncertainty following President Donald Trump’s tariff measures, rising expectations of Federal Reserve easing, a narrowing yield advantage over peers, and investor concerns over fiscal deficits and the Fed’s autonomy. Meanwhile, traders are now awaiting key US economic releases, including payrolls and weekly jobless claims due next week, which are expected to offer fresh insight into labour market conditions and the likely path of interest rates this year. Attention is also turning to Fed leadership, with President Donald Trump expected to name a successor to Jerome Powell early this year, as markets speculate for a more dovish appointment. Traders are currently pricing in two rate reductions this year, compared with the Fed’s own projection for just one.

Dollar Starts 2026 on Weak Footing

The Australian dollar appreciated to around $0.669 on Friday, trading near 14-month highs to kick off the new year positively as investors await next week’s monthly inflation data, which could influence the RBA’s policy stance following its hint at a possible rate hike this year. The central bank’s December meeting minutes showed policymakers are prepared to tighten policy if inflation does not ease as anticipated. Attention will also focus on the Q4 CPI report due January 28, as a stronger-than-expected core inflation print could prompt a move at the RBA’s February 3 meeting. Additionally, sentiment was supported by latest data showing December's manufacturing activity remained at its highest in three months. The Aussie was further aided by a broadly weaker US dollar amid concerns over the Federal Reserve’s independence under the Trump administration. The Australian dollar ended the year 2025 on a strong note, gaining nearly 8%, its strongest yearly performance since 2020.

Australian Dollar Starts 2026 Strong

The Hong Kong Dollar touched 7.79 against the USD, the lowest since December 2025. Over the past 4 weeks, US Dollar Hong Kong Dollar gained 0.02%, and in the last 12 months, it increased 0.12%.

Hong Kong Dollar Hits 4-week Low

The Canadian dollar weakened past 1.37 per US dollar, easing from its strongest level since July, as softer domestic growth signals, falling Canadian bond yields, and deteriorating terms of trade eroded Canada’s relative yield and income support, while a firmer US dollar into year end pulled capital back toward US assets. Statistics Canada reported a 0.3% contraction in real GDP in October, confirming that growth momentum cooled into Q4 and weakening the case for Canadian policy outperformance versus the US. Canada’s commodity terms of trade have also softened as crude benchmarks declined materially through the year, trimming export receipts and FX inflows. At the same time, Canadian 10-year yields eased into the low-3% range while US yields remained closer to the low-4% area, widening the carry gap and favoring dollar-denominated assets. The move is an unwinding part of the roughly 4.8% appreciation accumulated earlier in the year.

Canadian Dollar Trims Yearly Gains

The Mexican peso strengthened to around 17.9 per US dollar and is poised for a yearly gain of roughly 16% as markets absorbed firmer domestic activity alongside a softer US policy outlook. Mexico’s unemployment rate eased to 2.7% in the moving quarter to November but declining participation and broader measures that capture discouraged and informal workers point to a mixed labor market beneath the headline. Economic momentum surprised to the upside as the activity index rose 1.7% year on year in October, pushing back against fears of a sharper slowdown, while core inflation remained above 4% which explains Banxico’s cautious tone. The central bank cut its policy rate by 25 bp on December 18 to 7.00% in a 4–1 decision and signalled a data-dependent pause rather than an open easing cycle, keeping local yields attractive relative to developed markets and sustaining portfolio inflows. Externally a weaker dollar and expectations of Fed easing next year narrowed interest rate differentials.

Mexican Peso Holds Strong

The British pound traded at $1.34, marking a 7.5% gain against the US dollar in 2025, its largest annual rise since a 9.5% jump in 2017. Sterling benefited from diverging expectations over rate cuts by the Bank of England and the Federal Reserve in 2026, as well as a largely uneventful Autumn budget, which eased pressure on the currency in the second half of the year. The Bank of England cut borrowing costs four times in 2025, though policymakers remained split and signaled that the already gradual pace of cuts could slow further. In the US, investors priced in additional easing in 2026 amid signs of a cooling labor market. Domestic political concerns and stagnant growth in the UK tempered the pound’s gains. Against the euro, however, sterling fell more than 5% to 87.2 pence, its largest annual drop versus the single currency since 2020.

Pound Climbs 7.5% vs Dollar in 2025

The US dollar held steady 98.2 on the final trading day of 2025, remaining close to its lowest level since early October and on track for its largest annual decline since 2017. Over the year, the greenback has fallen 9.4%, reflecting a turbulent period that began with President Donald Trump’s chaotic rollout of tariffs. Expectations of Federal Reserve rate cuts, narrowing interest rate differentials with other major currencies, and concerns over fiscal deficits and the Fed’s independence have also contributed to the dollar’s weakness. Investors are now closely watching the appointment of a new Fed Chair, with Trump expected to announce Jerome Powell’s successor early next year. Meanwhile, minutes from the Fed’s December meeting revealed that most officials view additional interest rate cuts as appropriate if inflation declines further, though they remain divided over when and how far to cut. Markets continue to price in two quarter-point rate reductions in 2026.

Dollar Set for Sharpest Annual Loss Since 2017

The offshore yuan appreciated past 6.98 per dollar on Wednesday, remaining near the fifteen-month high reached in the previous session and on track for its biggest annual gain since 2020, as better-than-expected PMI data bolstered market sentiment. Official data showed China’s composite PMI rose to a six-month high of 50.7 in December 2025, with the manufacturing PMI returning to growth for the first time since March (50.1 vs 49.2 in November) and the non-manufacturing PMI also reaching a five-month high (50.2 vs 49.5). Meanwhile, a private survey indicated that manufacturing PMI unexpectedly increased to 50.1 in December from a four-month low of 49.9. These encouraging figures support China’s growth target of around 5% for this year. However, the yuan’s rapid appreciation has prompted state media to caution against one-way bets, with the central bank pledging to curb “overshooting risks” and setting its daily yuan fixing below market expectations for the past two weeks.

Offshore Yuan Poised for Biggest Annual Gain Since 2020

The offshore yuan appreciated past the 7 per dollar mark, its highest in fifteen months, as seasonal year-end demand persisted and a broadly weaker US dollar added support. Exporters typically convert more foreign currency into yuan at year-end to meet payments and administrative requirements. Also, the greenback remained under pressure as minutes from the Fed's last meeting showed that FOMC members showed some conviction that further rate cuts should be appropriate. The yuan’s rapid advance prompted Chinese state media to warn against one-way bets. The People’s Bank of China also pledged to curb “overshooting risks” and has set its daily fixing below market expectations for the past two weeks. The yuan has gained 4.3% this year, its biggest annual gain since 2020, although it depreciated against multiple currencies of key trade partners in Asia and Europe.

Chinese Yuan Appreciates Past 7 per USD

The US dollar edged up to around 98.2 on Tuesday but remained close to its weakest level since early October, as investors digested minutes from the Federal Reserve’s December meeting. The minutes showed that most Fed officials are inclined to cut interest rates further next year if inflation continues to ease, reinforcing expectations of a looser monetary policy stance. They also highlighted divisions within the Fed, underscoring how difficult the decision to cut rates by 25 basis points earlier this month had been. Political uncertainty added to pressure on the dollar after President Donald Trump said he has a preferred candidate to succeed Fed Chair Jerome Powell, while also suggesting he might remove Powell. Overall, the dollar is down about 9.6% this year, its steepest annual decline since 2017, driven by rate-cut expectations, shrinking yield advantages, trade policy uncertainty, fiscal concerns, and questions over the Fed’s independence.

DXY Edges Up Slightly

The Brazilian real strengthened to around 5.55 per US dollar after testing early August lows as markets absorbed stronger than expected labor data alongside a softer US policy outlook. Brazil’s unemployment rate fell to 5.2% in the moving quarter to November 2025, a record low and below both the prior 5.6% reading and expectations for 5.4%, reinforcing evidence of a resilient labor market despite still elevated real interest rates for households and firms. This resilience supports domestic demand and preserves room for the Brazilian Central Bank to maintain a hawkish stance should disinflation lose momentum. At the same time Brazil continues to offer exceptionally high real yields, with the 10 year rate remaining in double digits, sustaining portfolio inflows into local bonds and money markets through an attractive carry advantage over developed economies. Externally, easing expectations for US monetary policy have weighed on the dollar and narrowed interest rate differentials.

Brazilian Real Rebounds After Labor Data

The Indonesian rupiah firmed toward IDR 16,760 per dollar on Tuesday, snapping a three-day losing streak as the dollar index hovered near a two-month low ahead of the Fed’s December meeting minutes. Thin year-end trading amplified the move, while sentiment was supported by Bank Indonesia’s steady policy stance. The central bank left rates unchanged for a third straight meeting in mid-December after cutting 150bps over the past year, underscoring a cautious approach to growth support. Focus now shifts to December inflation data due later this week, expected to ease from an 18-month high and remain within BI’s 1.5%–3.5% target, reducing near-term policy risks. Indonesia is also projected to post a trade surplus for a 67th consecutive month in November, highlighting resilient exports and offering a buffer for the currency. Despite the rise, the local currency remains one of Asia’s weakest performers this year, down about 4.3%, as investor sentiment stays weighed by BI’s dovish bias.

Rupiah Strengthens, Still Asia’s Laggard in 2025

The offshore yuan hovered around the 7 per dollar mark, near its highest level in fifteen months, as seasonal year-end demand persisted and a broadly weaker U.S. dollar added support. Exporters typically convert more foreign currency into yuan at year-end to meet payments and administrative requirements, a trend likely to continue into January ahead of the Lunar New Year. Additionally, the greenback remained under pressure as investors awaited the Fed Reserve’s December meeting minutes for clues on the path of interest rates. Meanwhile, the yuan’s rapid advance prompted Chinese state media to warn against one-way bets, signaling growing official concern over the pace of gains. The People’s Bank of China also pledged to curb “overshooting risks” and has set its daily fixing below market expectations for the past two weeks. The yuan has gained more than 4% this year, its biggest annual rise since 2020, crossing 7 per dollar in offshore trade last week for the first time in over a year.

Yuan Remains Strong Amid Year-End Flows

The Japanese yen weakened to around 156 per dollar on holiday-thin trading Tuesday, reversing gains from the previous session, as investors weighed the country’s expansive fiscal policy. The cabinet recently approved Prime Minister Sanae Takaichi’s record-setting 122.3 trillion yen budget, aiming to balance aggressive fiscal spending with debt management by curbing new bond issuance. However, Japan's fiscal position remains a source of concern. With public debt already exceeding twice the size of the country’s economy, the government faces limited flexibility to implement bold stimulus measures. Nevertheless, the losses in the yen were partially offset by signals from authorities suggesting a potential intervention, following Finance Minister Katayama’s emphasis on Japan’s freedom to act against excessive currency moves. On the monetary policy front, markets are watching July for the next rate hike, though an earlier move is possible if the yen weakens further.

Japanese Yen Weakens on Fiscal Concerns

The US dollar held steady at 98 on Tuesday, remaining near its lowest level since early October, as investors awaited the Federal Reserve’s December meeting minutes for further clues on the path of interest rates. Markets are currently pricing in two more rate cuts in 2026, although Fed officials were divided over their next move, with most foreseeing only one reduction next year. Investors are also closely monitoring the appointment of the new Fed Chair, as President Trump is expected to name Jerome Powell’s successor early next year, a decision likely to shape expectations for monetary policy. So far this year, the dollar has declined 9.6%, marking its sharpest fall since 2017. The greenback’s weakness reflects a combination of factors, including expectations of Fed rate cuts, narrowing interest rate differentials with other major currencies, President Trump’s chaotic tariff policies, and concerns over fiscal deficits and the Fed’s independence.

Dollar Steady, Fed Minutes Awaited

The New Zealand dollar traded around $0.581, retreating from a three-month high, as investors continued to gauge the potential timing of rate hikes from the Reserve Bank. The central bank has recently signaled that interest rates are likely to remain at current levels for some time, pushing back expectations of a near-term hike. However, this view was challenged by the latest GDP data showing a rebound in Q3, reinforcing earlier signs of economic momentum after a prolonged period of weakness. As a result, markets are now pricing in around a 45% chance of a rate hike by July, with a move fully priced in by October. Elsewhere, a softer US dollar provided some support as markets continued to price in further Federal Reserve rate cuts next year. The antipodean currency is heading for its best month since June and is on track for an annual gain of nearly 4%, snapping a four-year streak of declines.

New Zealand Dollar Retreats

The South African rand traded around 16.6 per USD, near its highest level since August 2022, and is on track for its largest annual gain since 2009. The currency has risen more than 11% against the US dollar this year, supported by a powerful rally in precious metals, a softer dollar, and improving domestic economic fundamentals. The nation’s stronger fiscal performance, success in containing inflation through credible monetary policy, and political stability under the new government have played a key role.

South African Rand Hovers Around 2022-Highs

The euro traded just below $1.18 in a holiday-shortened week, hovering near its strongest level since late September and set for a 14.7% gain against the dollar in 2025, reflecting diverging policy paths between the European Central Bank and the Federal Reserve. The ECB kept interest rates steady in December and signaled they are likely to remain unchanged for some time, with ECB President Christine Lagarde noting the high uncertainty makes forward guidance on future rate moves difficult. In the US, markets are preparing for President Donald Trump to nominate a new Fed chair to replace Jerome Powell when his term ends in May, potentially favoring lower rates. The Fed cut the federal funds rate by 25 basis points at its December meeting to 3.50%-3.75%, completing a cumulative 75 bps of cuts in 2025 amid a cooling labor market and moderately elevated inflation. Investors are pricing in two more rate reductions next year, which could weigh on the dollar and further support the euro.

Euro Nears $1.18 as Diverging ECB and Fed Policies Boost 2025 Gains

The Indian rupee stabilized around 89.8 per USD, holding recent gains on a broadly softer dollar and RBI measures that helped steady sentiment. After breaching the 90-per-dollar mark earlier this month, the currency has shown signs of stabilisation, settling into a holding pattern as the dollar slid to a multi-month trough, giving the rupee some breathing room, while analysts noted that the worst phase of depreciation may be behind. Supportive factors include improved risk appetite and RBI intervention measures, such as a USD 5 billion dollar-rupee buy-sell swap to boost liquidity. India’s economic fundamentals also remain strong, with inflation cooling below 1% and GDP growth surprising on the upside, recording its strongest print in six quarters. Still, the rupee has fallen about 5.2% so far this year, the largest drop among major Asian currencies, pressured by weak investment flows, elevated import-driven dollar demand, steep US tariffs, and uncertainty around Indo-US trade talks.

Indian Rupee Stabilizes

The Indonesian rupiah weakened to around IDR 16,780 per dollar on Monday, slipping for a third session amid thin year-end trading. Sentiment stayed fragile as Bank Indonesia’s dovish stance weighed on the currency, even after the board held the key rate at 4.75% for a third straight meeting in mid-December, after a total 150bps reduction over the past year. Officials signaled further easing may be needed to aid growth, particularly after a major disaster in Sumatra. Caution also grew ahead of key domestic releases this week, including December inflation and November trade data. For 2025, the rupiah ranked among Asia’s weakest currencies, down about 4.3%. On policy, the central bank will retire Jakarta Interbank Offered Rate and replace it with the Indonesian Overnight Index Average (Indonia) from Jan. 1 to boost transparency and align with global standards. Globally,  the dollar index stayed subdued, nearing its lowest since early Oct., as markets priced in U.S. rate cuts next year.

Rupiah Dips Around 16,780 in Thin Year-End Trade

The offshore yuan steadied around the 7 per dollar mark on Monday, pausing after recent gains to a fifteen-month high, as investors turned cautious amid the central bank’s efforts to temper rapid one-way moves. The People’s Bank of China set a slightly softer-than-expected midpoint, signaling its intent to rein in excess yuan strength, while state-run media cautioned against betting on unilateral appreciation. Analysts also noted that seasonal foreign exchange flows and rising demand have supported the yuan’s broad uptrend, but appreciation pressure is expected to ease once year-end settlements conclude. Despite short-term caution, global investors continue to expect the yuan’s momentum to persist into 2026, with the key 7 level likely to be tested again, even as authorities reaffirm their commitment to maintaining currency stability. The yuan has gained more than 4.1% against the dollar so far this year and is on track to log the biggest annual rise since 2020.

Yuan Steadies as PBOC Signals Stability

The US dollar edged below 98 on Monday, trading sideways near its lowest level since early October as holiday-thinned trading continued and markets priced in rate cuts next year. Investors still factor in two more rate cuts in 2026, though Federal Reserve officials are split on the path forward, with the majority forecasting just a single additional reduction. Markets will also watch for the new Fed Chair, with President Trump set to announce Powell’s successor in early 2026, a move likely to influence the rate-cut outlook. Traders now turn to the FOMC minutes, due Tuesday, for further guidance on monetary policy. The dollar is on track for an annual loss of more than 9% in 2025, its steepest decline since 2017, pressured by Trump’s aggressive tariff policies and threats to Fed independence.

Dollar Remains Subdued

The Japanese yen strengthened to past 156 per dollar on Monday, recovering some losses from the previous session, as investors weighed the timing of further rate hikes and the possibility of intervention in thin year-end trading. Attention remained on the Bank of Japan’s policy outlook after its December meeting summary showed policymakers debating further tightening even after last month’s rate hike to a multi-decade high. Several members argued policy is still far from neutral in real terms and favored gradual rate increases to stay ahead of inflation risks. Others warned that keeping rates too low has helped weaken the yen and pushed up long-term yields, while timely increases could help anchor inflation expectations and stabilize bond markets, reinforcing expectations of a cautious but ongoing normalization path. Markets also monitored signs of intervention from authorities after Finance Minister Katayama highlighted Japan’s free hand in dealing with excessive moves in the yen.

Yen Rises on Hawkish BOJ Signals

The Israeli New Sheqel touched 3.17 against the USD, the highest since March 2022. Over the past 4 weeks, US Dollar Israeli New Sheqel lost 2.77%, and in the last 12 months, it decreased 13.18%.

Israeli New Sheqel Hits 3-year High

The Mexican peso strengthened to 17.9 per US dollar, testing its highest level since July 2024, underpinned by firmer-than-expected domestic activity, still-elevated Mexican yields, and a softer US dollar. Mexico’s unemployment rate stood at 2.7% in November 2025, slightly above the 2.6% recorded a year earlier and in line with expectations, keeping labour market conditions tight and broadly consistent with stable income dynamics. Economic momentum also surprised to the upside, as the economic activity index rose 1.7% year on year in October, pushing back against fears of a sharper slowdown and easing near-term pressure for aggressive monetary easing. Banxico reinforced that view by delivering a widely expected 25 bp cut to 7.00% while signalling a data-dependent pause, suggesting confidence that inflation will continue converging toward the 3% target even as core inflation remains above 4%. In parallel, the US dollar weakened amid expectations for Fed cuts next year.

Mexican Peso Tests July-2024 Highs

The Brazilian real weakened toward 5.56 per US dollar, nearing early August lows as investors reassessed the political risk premium required to hold Brazilian assets. Former president Jair Bolsonaro’s confirmation of Flávio as his preferred presidential nominee revived concerns over next year’s policy direction and fiscal coherence, encouraging non resident outflows, widening FX premia, and keeping the outlook for policy execution uncertain. Earlier in the month, the currency had drawn some support from softer inflation data, with Brazil’s mid month inflation easing to 4.41% in December, broadly in line with expectations near 4.4% and still within the Central Bank’s 1.5% to 4.5% tolerance band. The print reinforced the disinflation narrative and helped trim the inflation risk premium priced into the real. At the same time the US dollar softened despite a strong 4.3% Q3 GDP reading, as markets continued to price Fed easing next year and safe haven demand faded.

Brazilian Real Weakens Toward Early-August Lows

The Indonesian rupiah slipped toward IDR 16,750 per dollar on Friday after briefly firming near 16,730 in the prior session, as holiday-thinned trading weighed on sentiment. Renewed bets on lower interest rates added pressure after Governor Perry Warjiyo signaled policymakers still have room to ease, citing mild inflation and the need to support growth following the late-November disaster in Sumatra. Earlier this month, Bank Indonesia kept its benchmark rate at 4.75% for a third straight meeting, after cutting a total of 150bps between September 2024 and September 2025. Caution also grew ahead of key domestic releases next week, including December inflation and November trade data. For the week, the rupiah is set for a second straight decline, extending its year-to-date drop to about 4% and ranking among Asia’s weakest currencies. Downside was capped by a softer US dollar, with the dollar index hovering near its lowest since early October as markets priced in Fed rate cuts for 2026.

Rupiah Dips But Dollar Weakness Limits Losses

The US dollar held at 97.9 on Friday, remaining at its lowest level since early October, as investors continued to expect interest rate cuts by the Federal Reserve next year. Strong GDP data released on Tuesday had little impact on the rate outlook, with markets still pricing in two additional cuts in 2026. However, Fed officials remain divided over their next move, with most projecting only one more reduction. Adding to pressure on the dollar, precious metals have gained on safe-haven demand amid rising geopolitical tensions. So far this year, the dollar has fallen 9.7%, on track for its weakest annual performance since 2017, marked by President Donald Trump’s aggressive tariff policies and concerns over the Fed's independence.

Dollar Remains Under Pressure

The offshore yuan appreciated to around 7 per dollar on Friday, extending gains for the third consecutive session and marking its strongest level in over fifteen months, as investors responded to signs of measured policy guidance from authorities. In its latest action, China established the yuan’s daily reference rate below market expectations by a record margin, reflecting the People’s Bank of China’s deliberate strategy of promoting a gradual and controlled appreciation. The Central Bank’s policy approach is intended to bolster exporters, regulate capital flows, and maintain overall market stability. According to CICC reports, the currency is expected to maintain relative stability in 2026, while balancing objectives such as domestic growth, external payment stability, and the promotion of its international use.

Yuan Strengthens to Multi-Year High

The South Korean won depreciated to around 1,451 on Friday, retreating from the previous session’s gains as renewed caution from the central bank weighed on sentiment. In its 2026 policy framework, the Bank of Korea said any further easing would depend on inflation, growth, and financial stability, signaling a shift from last year’s dovish approach and indicating that the 2.5% policy rate could remain in place for an extended period. Persistent currency weakness remains a key concern, driving up import costs and inflation, with forecasts for next year’s inflation rising to around 2.0%. To manage exchange-rate risks, the BOK plans to strengthen FX market operations and attract foreign investors by expanding 24-hour trading, relaxing offshore won rules, extending financial network hours from April, and piloting an offshore won settlement system by year-end.

Korean Won Weakens on Cautious Policy Signal

The Japanese yen strengthened past 155 per dollar on Friday, positioning itself for solid weekly gains as investors expect the Bank of Japan to continue raising interest rates despite Tokyo’s cooler-than-expected inflation data. The capital’s annual inflation rate eased to a more than one-year low of 2% in December, reflecting softer food and energy price pressures. Tokyo’s inflation data are widely regarded as a leading indicator of nationwide price trends and are therefore closely monitored by policymakers and markets. Last week, the BOJ raised its policy rate to 0.75%, the highest since 1995, with Governor Kazuo Ueda signaling more hikes if inflation persists. However, despite Ueda's signals, the currency remains near January lows, prompting officials to warn of possible market intervention. Meanwhile, Japan’s industrial production fell 2.1% year-on-year in November, retail sales rose 1%, and the unemployment rate remained steady at 2.6%.

Yen Heads for Solid Weekly Gains

The Chinese Yuan touched 7.00 against the USD, the highest since October 2024. Over the past 4 weeks, US Dollar Chinese Yuan lost 1.03%, and in the last 12 months, it decreased 4.1%.

Chinese Yuan Hits 14-month High

The Turkish lira weakened to a record low of 42.85 per US dollar in late December, maintaining the controlled depreciation trend by the Central Bank of Turkey as markets assessed the outlook of currency flows for the upcoming year. The central bank continued to manage their foreign exchange reserves and maintained measures to stimulate lira deposits by domestic investors to control the pace of the currency's depreciation, which is set to lose around 18% of its value against the dollar this year. The TCMB had reduced its key interest rate by 9.5 percentage points to 38% this year as inflation slowed to a four-year low of 31% in November, although price growth was likely to end the year above the target of 24%. The figures compare to a 27% increase in the national minimum wage for next year, in line with expectations, extending trend of undershooting official inflation figures to further squeeze household's purchasing power.

Turkish Lira Extends Controlled Weakening

The Indian rupee hovered around 89.6 per USD, trading sideways near three-week highs, supported by a softer dollar and recent central bank measures that helped steady sentiment. The currency has settled into a holding pattern after rebounding from record lows, with the dollar’s slide to a multi-month trough giving the rupee some breathing room, even as traders remain cautious about sustaining gains. Focus has shifted to the forward market after the Reserve Bank of India announced a $10 billion dollar–rupee buy/sell swap, aimed at absorbing excess dollar liquidity in the banking system. The move has already eased pressure on forward premiums, which had surged sharply in recent sessions due to abundant dollar supply and year-end balance sheet constraints. With the swap expected to cool elevated premia, particularly at longer tenors, traders see the RBI’s action as a signal of intent to smooth distortions while keeping spot moves relatively contained.

Rupee Sideways Near Three-Week Highs

The Indonesian rupiah weakened toward IDR 16,760 per dollar on Wednesday after briefly firming around 16,700 in the prior session, as thin holiday trading dampened activity. Bank Indonesia’s dovish bias weighed on sentiment, despite the central bank holding its key rate at 4.75% for a third meeting in mid-December, after a total of 150bps of cuts between September 2024 and September 2025. Governor Perry Warjiyo flagged that the board still has room to ease, citing mild inflation and the need to aid growth, particularly after the late-November disaster in Sumatra. Year-to-date, the rupiah has been among Asia’s weakest currencies, down about 4.2%. Still, losses were capped by news that Indonesia and the U.S. will sign a reciprocal tariff deal by late January, to be endorsed by Presidents Prabowo Subianto and Donald Trump. Globally, the dollar index slipped to a near 12-week low around 97.7 as traders priced in potential Fed cuts next year amid easing inflation and a cooling labor market.

Rupiah Slips Despite Softer Dollar

The offshore yuan strengthened to around 7.01 per dollar on Wednesday, hitting a fresh fifteen-month high, driven by the strong official midpoint fixing and seasonal year-end demand. Exporters typically convert more foreign currency into yuan at year-end to meet payments and administrative requirements, a trend that could extend into January ahead of the Lunar New Year. Additionally, the People’s Bank of China set the daily midpoint at 7.0471 per dollar, its strongest since September 30, 2024, although still below market estimates, signaling efforts to moderate rapid gains. Despite the strong fix, the central bank has consistently maintained the midpoint below estimates since late November, a move traders interpret as an effort to rein in yuan momentum. The currency has gained roughly 3.9% so far this year, on track for its largest annual rise since 2020, supported by a broad dollar weakness, easing US-China trade tensions, and resilient Chinese exports.

Offshore Yuan Hits Fresh 15-Month Peak

The South Korean Won touched 1460.00 against the USD, the highest since November 2025. Over the past 4 weeks, US Dollar South Korean Won lost 0.36%, and in the last 12 months, it increased 0.22%.

South Korean Won Hits 4-week High

The South Korean won climbed 1.1% to around 1,465 per dollar on Wednesday, rebounding significantly from multi-month lows to its strongest level in almost a month, as the National Pension Service carried out strategic foreign exchange hedging operations. The world’s third-largest pension fund, in consultation with FX authorities, has been adjusting overseas investment flows to reduce pressure on the currency. The Bank of Korea supported the moves by renewing a $65 billion currency swap line with the NPS and paying interest on financial firms’ reserve deposits to offset temporary losses from the hedging operations. Market participants said these steps helped cap the upside of dollar-won rates amid ongoing volatility. Analysts cautioned, however, that structural factors, including continued overseas investment and the search for higher returns abroad, remain a constraint on the won, leaving it sensitive to global risk sentiment and domestic capital outflows.

South Korean Won Gains on NPS, BOK Support

The New Zealand dollar rose to around $0.585, climbing for a third consecutive session to reach its highest level since late September, as investors bet on a potential RBNZ rate hike next year. This follows recent data showing the economy rebounded in Q3, reinforcing earlier signs of a modest pick-up after an extended period of weak activity. This added further support to expectations of a rate increase, with markets now pricing in roughly a 45% chance of a move by July. The dollar’s weakness, driven by expectations of further US monetary easing, also contributed to the kiwi’s gains. Nonetheless, uncertainty over the RBNZ’s rate path remains, as the economic recovery is fragile, with growth largely driven by the primary sector rather than broad domestic demand. RBNZ Governor Anna Breman also indicated that interest rates are likely to stay at current levels for some time. The kiwi is on track for an annual gain of more than 4% in 2025.

Kiwi Dollar Climbs to 3-Month High

The US dollar weakened further to around 97.7 on Wednesday, hitting its lowest level since early October, as investors continued to bet that the Federal Reserve has room to cut rates next year. Recent data showed solid US GDP growth but failed to alter the rate outlook. Markets are pricing in two rate cuts in 2026 amid easing inflation, a moderating labor market, and President Trump’s push for looser policy, even as Fed officials remain divided. The dollar is also on track for its worst annual performance in more than two decades, after a turbulent year marked by Trump’s tariffs and concerns over his influence on the Fed’s independence. Additionally, safe-haven flows into precious metals, rising geopolitical tensions, and gains in the yen, following the Bank of Japan’s rate hike and potential intervention by authorities, have further pressured the greenback, reinforcing expectations of policy divergence and typical year-end weakness.

Dollar Hits Near 12-Week Low

The Hong Kong Dollar touched 7.78 against the USD, the highest since November 2025. Over the past 4 weeks, US Dollar Hong Kong Dollar gained 0%, and in the last 12 months, it increased 0.1%.

Hong Kong Dollar Hits 4-week High

AUDUSD increased to 0.67, the highest since October 2024. Over the past 4 weeks, Australian Dollar US Dollar gained 3.73%, and in the last 12 months, it increased 7.88%.

Australian Dollar Hits 14-month High

The Japanese yen strengthened to around 156.7 per dollar on Wednesday, marking its third straight session of gains after the Bank of Japan’s October meeting minutes signaled further policy tightening. The minutes highlighted active debate among policymakers over whether interest rates should continue rising toward a neutral level, with some noting that higher rates could help sustain long-term economic and price stability. Officials also expressed concerns that a weaker yen could stoke inflation by raising import costs. While the BOJ left rates unchanged at 0.5% in late October, the discussion suggested conditions for additional hikes were emerging. This view was reinforced by the December hike to 0.75%, the highest in decades, even some members urged caution given concerns around wage growth, global trade tensions, and the new government’s policy stance. Markets now await Tokyo’s finalization of the FY2026 budget at roughly JPY 122 trillion, with cabinet approval possible by Friday.

Japanese Yen Extends Rally

EURUSD increased to 1.18, the highest since September 2025. Over the past 4 weeks, Euro US Dollar gained 2.01%, and in the last 12 months, it increased 13.26%.

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