The US dollar opened 2026 weakly on Friday. Throughout last year, the dollar was pressured by many major currencies due to narrowing interest rate differentials between the US and other countries. Concerns about the US budget deficit, the global trade war, and the independence of the US Federal Reserve (Fed) weighed on the dollar and are expected to continue this year.

The euro and the pound sterling are examples of currencies that have strengthened significantly. The euro stabilized at around $1.17 after surging more than 13% last year, while the pound sterling held around $1.34 after rising nearly 8%. This increase was the sharpest since 2017. However, trading was relatively quiet due to the closure of Japanese and Chinese markets, limiting currency movements.

The dollar index recorded a sharp decline throughout 2025, its largest decline in eight years. While some believe the dollar's dominance is fading, some analysts believe this weakening is excessive and that the dollar still has the potential to rebound due to the relatively strong US economy. Market focus is now on US employment data and the direction of the Fed's interest rate policy, particularly as Fed Chairman Jerome Powell's term ends in May.

On the other hand, the Japanese yen remains an exception. It remains near its weakest level in 10 months, despite the Bank of Japan raising interest rates twice last year. Overly cautious measures are making investors less confident. Furthermore, concerns about Japan's fiscal policy are making it difficult for the yen to strengthen, opening up the possibility of government intervention if the weakening continues. (az)

Source: Newsmaker.id