Market News
Dollar starts 2026 tentatively higher after biggest annual drop in eight years - REUTERS
By Ankur Banerjee and Samuel Indyk
Summary
- US data next week likely to dictate near-term currency movement
- Yen wobbles near 10-month low as intervention risk lurks
- Euro, pound stand tall against dollar
LONDON, Jan 2 (Reuters) - The U.S. dollar made a slightly positive start to 2026 on Friday after struggling against most currencies last year, while the yen inched back towards a 10-month low as traders awaited U.S. economic data to predict interest rate moves this year.
A narrowing interest rate difference between the U.S. and other economies cast a shadow over markets last year, resulting in sharp gains against the dollar for most major currencies, with the exception of the Japanese yen.
Worries about the U.S. fiscal deficit, a global trade war and concern about Federal Reserve independence took a toll on the greenback, and those issues are likely to linger into 2026.
The euro was down 0.2% at $1.1725 on the first trading day of the year after surging 13.5% last year, while sterling last bought $1.3455 following a 7.7% increase in 2025. Both clocked their steepest annual increases since 2017.
Markets in Japan and China were closed on Friday, making for light trading volume and little movement.
"Market liquidity should improve next week alongside a fuller data slate," said Jens Nærvig Pedersen, FX strategist at Danske Bank.
