Currency Shifts: The Dollar Takes a Backseat

The U.S. dollar weakened ahead of Thanksgiving, with investors focusing on potential interest rate cuts in 2026. The yen, euro, and New Zealand dollar saw gains, driven by confidence in respective central banks and economic data. The Australian dollar also rose following strong inflation figures.

The U.S. dollar took a step back on Thursday, as low trading volume ahead of the Thanksgiving holiday shifted investor focus towards anticipated interest rate cuts in 2026. Meanwhile, other currencies, including the yen and euro, gained strength against the dollar.

The New Zealand dollar hit a three-week high at $0.5714, boosted by the Reserve Bank of New Zealand's decision to end its rate cut cycle, contrasting with the Federal Reserve's projected cuts. Australia's dollar rose on strong inflation figures, further supported by China's yuan performance.

Sterling climbed to its highest since late October, bolstered by Britain's fiscal policy. Analysts predict upcoming big trades for 2026 to not favor the U.S. dollar, especially if Kevin Hassett, a rate cut advocate, assumes the role of Federal Reserve chair.

(With inputs from agencies.)