Dollar's Rally and Geopolitical Tensions Shake Global Markets

The dollar started 2026 with a rise against various currencies amid a geopolitically charged backdrop featuring U.S. actions in Venezuela. Despite the rally, analysts warn it may not last due to potential downturns in the upcoming U.S. employment report. Investors anticipate reduced U.S. interest rates this year.

The dollar began the first trading week of 2026 by reaching multi-week highs against various currencies, highlighting its recovery after a weak December. This resurgence comes amid heightened geopolitical tensions, especially following recent U.S. operations in Venezuela involving the capture of President Nicolas Maduro.

President Donald Trump announced the possible expansion of U.S. actions in Venezuela, along with potential military moves in Colombia and Mexico, all aimed at curbing drug trafficking and oil industry barriers. Despite the dollar's rise, market analysts remain cautious, noting that this rally may not be sustainable due to looming economic uncertainties.

The financial community turns its attention to a slew of U.S. economic data, with the monthly employment report later in the week poised to influence perceptions regarding the Federal Reserve's monetary policy. Moreover, impending rate cuts and the potential appointment of a new, rate-reduction-focused Fed chair by Trump could further impact currency markets.

(With inputs from agencies.)