The U.S. dollar opened 2026 on a weak note, extending the slide it saw through most of last year. In Friday’s trading, the dollar continued to lose ground against major currencies as the gap between U.S. interest rates and those in other economies keeps shrinking.
The dollar index, which tracks the greenback against six major currencies, stood at around 98.24. That comes after a rough 2025, when the dollar posted its biggest annual drop in eight years, falling 9.4%. A big reason for the decline has been growing concern about the Federal Reserve’s independence under President Donald Trump’s administration.
While the dollar struggled, Europe’s currencies held firm. The euro and the British pound managed to keep the strong gains they made last year, marking their best annual performance since 2017.
The Japanese yen, however, told a different story. It stayed near a ten-month low, trading around 156.74 per dollar. Markets remain cautious, watching closely to see if Japanese authorities step in to support the yen, which has been under steady pressure despite strong verbal warnings from Tokyo late last year.
Looking ahead, traders are now focused on who President Trump will choose to lead the Federal Reserve as current Chair Jerome Powell’s term ends in May. Many expect the pick to be someone more willing to cut interest rates quickly and aggressively, in line with White House preferences.
Attention is also turning to next week’s U.S. jobs and unemployment data. Those numbers will be key in shaping expectations about the health of the labor market—and where interest rates may head in 2026.
For now, the dollar enters the new year facing uncertainty, political pressure, and shifting rate expectations, while global currency markets wait for clearer signals on what comes next.
