US dollar struggles in early 2026 following record drop — Reuters
Photo: The dollar got off to a weak start in 2026 after a record decline (Getty Images)
The US dollar started 2026 weakly on Friday after a difficult year in which the American currency lost ground against most global currencies, Reuters reports.
How dollar started 2026
The narrowing interest rate differential between the US and other economies weighed on the dollar throughout 2025.
This led to a significant strengthening of most currencies against the US dollar, except for the Japanese yen.
Additional pressure on the dollar came from concerns about the US budget deficit, the risks of a global trade war, and concerns about the independence of the Federal Reserve.
These factors are expected to persist in 2026.
Euro and pound exchange rates
On the first trading day of the year, the euro traded steadily at $1.1752 after rising 13.5% at the end of last year.
The pound sterling last traded at $1.3473, adding 7.7% in 2025. For both currencies, this was the sharpest annual increase since 2017.
Trading in Japan and China was suspended on Friday due to the weekend, resulting in low trading volumes and minor price fluctuations in the currency market.
Dollar dominance declining
The dollar index, which tracks the US currency against six major currencies, stood at 98.186 after falling 9.4% in 2025. This was the index's biggest annual decline in eight years.
"We have seen the peak in dollar supremacy," says a senior market analyst.
At the same time, he notes that there have not been two consecutive years of decline in the dollar index in the last two decades.
"I believe its demise has been overstated and that the relative strength of the U.S. economy will mean we see it bounce back this year," the analyst adds.
