U.S. Dollar Faces Dismal Year Amidst Rate Cuts and Trade Woes

The U.S. dollar remained stable but faced its largest annual drop since 2017, pressured by rate cuts and trade policies under President Trump. Analysts predict these challenges will persist into 2026, impacting its performance against currencies like the euro and sterling, with global market implications.

The U.S. dollar continues to struggle, heading toward its largest annual decline since 2017, due to persistent rate cuts and uncertain trade policies under President Donald Trump. Analysts expect these challenges to extend into 2026, impacting its rivals, such as the euro and sterling, which have shown significant gains.

Potential changes in Federal Reserve leadership add to concerns, as President Trump plans to announce a new Fed chair in January, replacing Jerome Powell. This uncertainty, coupled with broader fiscal worries, has maintained a bearish outlook on the dollar, reflected in net-short positions since April.

While other currencies like the euro and pound report their biggest gains in years, the Japanese yen has remained flat despite rate hikes. The risk-sensitive Australian and New Zealand dollars show strong performance, attributing to shifts in the global currency landscape as 2025 concludes.

(With inputs from agencies.)