The U.S. dollar held steady early Tuesday as currency markets remained subdued ahead of the Federal Reserve’s release of its December policy minutes, which are expected to shed light on internal divisions within the central bank about interest-rate directions for 2026.
The dollar index, which measures the U.S. currency’s strength against a basket of major peers, was hovering near 98.03, close to a three-month low after a year of significant weakness. In 2025, the dollar was on track for its steepest annual decline in about eight years, pressured by Fed rate-cut expectations, narrowing interest rate advantages over other currencies, and concerns over U.S. fiscal deficits and political uncertainty.
Against other major currencies, the euro strengthened toward $1.177, amid gains that put it on course for its best annual performance since 2017, while the British pound rose near $1.351, supported by broader market sentiment.
Traders are now focusing on the Fed minutes for clues on future monetary policy after the Fed’s recent rate cut, with markets pricing in expectations of additional rate reductions in 2026, which could further weigh on the dollar. Strategists at institutions such as MUFG foresee potential continued dollar weakness, projecting further declines in the dollar index next year.
The muted trading activity reflects thin holiday liquidity and a cautious investor approach as the year wraps up, leaving the greenback’s direction sensitive to the Fed’s communications and evolving global economic data.
Leave A Comment