The US Dollar Index (DXY) remained slightly higher in a quiet year-end session on Wednesday. However, it has lost most of its intraday gains, having peaked at 98.44, and is trading near 98.25 ahead of the US open.
The DXY, which measures the greenback against a basket of six currencies, is trading about 2% below its November peak of 100.40 and is on track for a nearly 10% annual decline, its weakest performance in eight years.
The US dollar has been one of the weakest performers in the G8 in 2025.
Investor concerns about the impact of US President Donald Trump's erratic trade policies and growing signs of an economic slowdown have increased short positions in the US dollar throughout the year. Furthermore, unprecedented political pressure on the Federal Reserve to lower borrowing costs has eroded market confidence in the bank's independence, calling into question the US dollar's status as the world's reserve currency.
Considering this, the Federal Reserve remains in the midst of a monetary easing cycle, at a time when most central banks worldwide have reached their terminal levels. This has become a strong obstacle to a significant greenback recovery and is likely to keep the US dollar under pressure in 2026.
Trading volumes remained low on the final trading day of the year, but the weekly US Jobless Claims report may provide the final boost to the forex market. Applications for unemployment benefits are expected to have risen to 220,000 in the week ending December 16, from 214,000 the previous week. The risks for the USD are skewed to the downside. (alg)
Source: FXstreet
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