The Turkish lira weakened to a record low of 42.85 per US dollar in late December, maintaining the controlled depreciation trend by the Central Bank of Turkey as markets assessed the outlook of currency flows for the upcoming year. The central bank continued to manage their foreign exchange reserves and maintained measures to stimulate lira deposits by domestic investors to control the pace of the currency's depreciation, which is set to lose around 18% of its value against the dollar this year. The TCMB had reduced its key interest rate by 9.5 percentage points to 38% this year as inflation slowed to a four-year low of 31% in November, although price growth was likely to end the year above the target of 24%. The figures compare to a 27% increase in the national minimum wage for next year, in line with expectations, extending trend of undershooting official inflation figures to further squeeze household's purchasing power.

Turkish Lira Extends Controlled Weakening

The Indian rupee hovered around 89.6 per USD, trading sideways near three-week highs, supported by a softer dollar and recent central bank measures that helped steady sentiment. The currency has settled into a holding pattern after rebounding from record lows, with the dollar’s slide to a multi-month trough giving the rupee some breathing room, even as traders remain cautious about sustaining gains. Focus has shifted to the forward market after the Reserve Bank of India announced a $10 billion dollar–rupee buy/sell swap, aimed at absorbing excess dollar liquidity in the banking system. The move has already eased pressure on forward premiums, which had surged sharply in recent sessions due to abundant dollar supply and year-end balance sheet constraints. With the swap expected to cool elevated premia, particularly at longer tenors, traders see the RBI’s action as a signal of intent to smooth distortions while keeping spot moves relatively contained.

Rupee Sideways Near Three-Week Highs

The Indonesian rupiah weakened toward IDR 16,760 per dollar on Wednesday after briefly firming around 16,700 in the prior session, as thin holiday trading dampened activity. Bank Indonesia’s dovish bias weighed on sentiment, despite the central bank holding its key rate at 4.75% for a third meeting in mid-December, after a total of 150bps of cuts between September 2024 and September 2025. Governor Perry Warjiyo flagged that the board still has room to ease, citing mild inflation and the need to aid growth, particularly after the late-November disaster in Sumatra. Year-to-date, the rupiah has been among Asia’s weakest currencies, down about 4.2%. Still, losses were capped by news that Indonesia and the U.S. will sign a reciprocal tariff deal by late January, to be endorsed by Presidents Prabowo Subianto and Donald Trump. Globally, the dollar index slipped to a near 12-week low around 97.7 as traders priced in potential Fed cuts next year amid easing inflation and a cooling labor market.

Rupiah Slips Despite Softer Dollar

The offshore yuan strengthened to around 7.01 per dollar on Wednesday, hitting a fresh fifteen-month high, driven by the strong official midpoint fixing and seasonal year-end demand. Exporters typically convert more foreign currency into yuan at year-end to meet payments and administrative requirements, a trend that could extend into January ahead of the Lunar New Year. Additionally, the People’s Bank of China set the daily midpoint at 7.0471 per dollar, its strongest since September 30, 2024, although still below market estimates, signaling efforts to moderate rapid gains. Despite the strong fix, the central bank has consistently maintained the midpoint below estimates since late November, a move traders interpret as an effort to rein in yuan momentum. The currency has gained roughly 3.9% so far this year, on track for its largest annual rise since 2020, supported by a broad dollar weakness, easing US-China trade tensions, and resilient Chinese exports.

Offshore Yuan Hits Fresh 15-Month Peak

The South Korean Won touched 1460.00 against the USD, the highest since November 2025. Over the past 4 weeks, US Dollar South Korean Won lost 0.36%, and in the last 12 months, it increased 0.22%.

South Korean Won Hits 4-week High

The South Korean won climbed 1.1% to around 1,465 per dollar on Wednesday, rebounding significantly from multi-month lows to its strongest level in almost a month, as the National Pension Service carried out strategic foreign exchange hedging operations. The world’s third-largest pension fund, in consultation with FX authorities, has been adjusting overseas investment flows to reduce pressure on the currency. The Bank of Korea supported the moves by renewing a $65 billion currency swap line with the NPS and paying interest on financial firms’ reserve deposits to offset temporary losses from the hedging operations. Market participants said these steps helped cap the upside of dollar-won rates amid ongoing volatility. Analysts cautioned, however, that structural factors, including continued overseas investment and the search for higher returns abroad, remain a constraint on the won, leaving it sensitive to global risk sentiment and domestic capital outflows.

South Korean Won Gains on NPS, BOK Support

The New Zealand dollar rose to around $0.585, climbing for a third consecutive session to reach its highest level since late September, as investors bet on a potential RBNZ rate hike next year. This follows recent data showing the economy rebounded in Q3, reinforcing earlier signs of a modest pick-up after an extended period of weak activity. This added further support to expectations of a rate increase, with markets now pricing in roughly a 45% chance of a move by July. The dollar’s weakness, driven by expectations of further US monetary easing, also contributed to the kiwi’s gains. Nonetheless, uncertainty over the RBNZ’s rate path remains, as the economic recovery is fragile, with growth largely driven by the primary sector rather than broad domestic demand. RBNZ Governor Anna Breman also indicated that interest rates are likely to stay at current levels for some time. The kiwi is on track for an annual gain of more than 4% in 2025.

Kiwi Dollar Climbs to 3-Month High

The US dollar weakened further to around 97.7 on Wednesday, hitting its lowest level since early October, as investors continued to bet that the Federal Reserve has room to cut rates next year. Recent data showed solid US GDP growth but failed to alter the rate outlook. Markets are pricing in two rate cuts in 2026 amid easing inflation, a moderating labor market, and President Trump’s push for looser policy, even as Fed officials remain divided. The dollar is also on track for its worst annual performance in more than two decades, after a turbulent year marked by Trump’s tariffs and concerns over his influence on the Fed’s independence. Additionally, safe-haven flows into precious metals, rising geopolitical tensions, and gains in the yen, following the Bank of Japan’s rate hike and potential intervention by authorities, have further pressured the greenback, reinforcing expectations of policy divergence and typical year-end weakness.

Dollar Hits Near 12-Week Low

The Hong Kong Dollar touched 7.78 against the USD, the highest since November 2025. Over the past 4 weeks, US Dollar Hong Kong Dollar gained 0%, and in the last 12 months, it increased 0.1%.

Hong Kong Dollar Hits 4-week High

AUDUSD increased to 0.67, the highest since October 2024. Over the past 4 weeks, Australian Dollar US Dollar gained 3.73%, and in the last 12 months, it increased 7.88%.

Australian Dollar Hits 14-month High

The Japanese yen strengthened to around 156.7 per dollar on Wednesday, marking its third straight session of gains after the Bank of Japan’s October meeting minutes signaled further policy tightening. The minutes highlighted active debate among policymakers over whether interest rates should continue rising toward a neutral level, with some noting that higher rates could help sustain long-term economic and price stability. Officials also expressed concerns that a weaker yen could stoke inflation by raising import costs. While the BOJ left rates unchanged at 0.5% in late October, the discussion suggested conditions for additional hikes were emerging. This view was reinforced by the December hike to 0.75%, the highest in decades, even some members urged caution given concerns around wage growth, global trade tensions, and the new government’s policy stance. Markets now await Tokyo’s finalization of the FY2026 budget at roughly JPY 122 trillion, with cabinet approval possible by Friday.

Japanese Yen Extends Rally

EURUSD increased to 1.18, the highest since September 2025. Over the past 4 weeks, Euro US Dollar gained 2.01%, and in the last 12 months, it increased 13.26%.

Euro Hits 13-week High

The Australian dollar climbed to around $0.670, hitting its highest level since October last year, boosted by growing expectations of higher interest rates from the Reserve Bank. Minutes from the RBA’s latest meeting indicated the board is prepared to tighten policy if inflation does not ease as anticipated, putting the spotlight on the fourth-quarter CPI report due January 28. Analysts say that a stronger-than-expected Q4 core inflation print could prompt a rate hike at the RBA’s February 3 meeting. While the central bank is expected to remain on hold through 2026, markets continue to weigh the risks of higher yields and potential policy tightening, currently pricing in about a 28% chance of a 25 bp rate increase. The Aussie was further supported by surging commodity prices, with gold and copper hitting new highs, reflecting Australia’s strong export profile. The currency also strengthened against the yen, reaching a 17-month peak and has gained nearly 7% so far this quarter.

Australian Dollar Hits 14-Month High

The Canadian dollar strengthened toward 1.37 per US dollar, its firmest level since July, as investors digested fresh domestic data alongside renewed US dollar weakness. Statistics Canada’s flash GDP estimate pointed to a 0.1% monthly expansion in November, a modest rebound after October’s sharp contraction that eased near-term growth concerns and trimmed the urgency for policy easing. The Bank of Canada’s decision to hold the overnight rate at 2.25% and emphasize a data-dependent pause rather than further cuts has kept short-term policy settings relatively tight, supporting Canadian yields and the currency. While domestic activity remains uneven, recent indicators suggest some stabilization, reinforcing the case for patience from the Central Bank. At the same time, the US dollar has softened as markets price Fed rate cuts next year amid cooling labour and inflation dynamics, removing a key source of pressure on the loonie.

Canadian Dollar Hits Highest Since July

The Brazilian real strengthened toward 5.54 per US dollar, rebounding from early-August lows as investors absorbed softer-than-expected domestic inflation alongside a weaker US dollar. Brazil’s mid-month inflation came in at 4.41% in December, broadly in line with forecasts of 4.4% and still within the Central Bank’s 1.5%–4.5% tolerance band, easing near-term price concerns, reinforcing the disinflation narrative, and trimming the inflation risk premium priced into the currency. At the same time, the US dollar softened even after a strong 4.3% Q3 GDP print, as markets continued to price Fed easing next year and safe-haven dollar demand ebbed. Still, gains in the real remain capped by lingering political uncertainty, with renewed Bolsonaro-linked electoral risks and recent congressional moves, including a Senate bill to reduce Jair Bolsonaro’s sentence, clouding the outlook for policy cohesion and fiscal execution and keeping Brazil’s FX risk premium elevated.

Brazilian Real Rebounds After Mid-Month Inflation and USD Weakness

The Mexican Peso touched 17.93 against the USD, the highest since July 2024. Over the past 4 weeks, US Dollar Mexican Peso lost 3.1%, and in the last 12 months, it decreased 11.14%.

Mexican Peso Hits 17-month High

The US dollar trimmed some of its losses to around 98 on Tuesday but remained near its lowest level since early October, as investors balanced stronger economic data against expectations of easier monetary policy ahead. US GDP expanded at a solid 4.3% annualized pace in the third quarter, accelerating from 3.8% previously, while private payroll data pointed to steady, though moderating, job growth. Despite these positives, the dollar remains under pressure, down nearly 9.7% this year and heading for its weakest annual performance since 2017. Markets are pricing in two rate cuts in 2026 amid cooling inflation, a softening labor market, and President Trump’s calls for looser policy, even as Fed officials remain divided. Safe-haven demand for precious metals, geopolitical tensions, and a stronger yen following a Bank of Japan rate hike have further weighed on the greenback, reinforcing expectations of policy divergence and seasonal weakness into year-end.

DXY Under Pressure Near 11-Week Lows

The British pound strengthened past $1.35, its highest in three months, benefiting from a weaker US dollar as markets anticipate at least two Federal Reserve rate cuts next year, reducing the dollar’s yield advantage. The Bank of England cut rates by 25 basis points to 3.75% in December, in a narrow 5-4 vote reflecting ongoing inflation concerns. Although inflation eased to 3.2% in November, it remains well above the Bank’s 2% target. Governor Andrew Bailey said rates are likely to trend lower, but not as quickly as markets might hope. UK GDP grew 0.1% in the third quarter, in line with expectations, though the BoE forecasts flat growth in the final quarter. Even so, traders expect at least one further rate cut in the first half of next year. Sterling has gained over 2% this month and roughly 8% year-to-date, positioning it for its strongest annual performance against the dollar since 2017.

Sterling Breaks $1.35 Level

The Euro exchange rate rose above 1.18 US Dollars in the foreign exchange interbank market.

Euro traded above 1.18

DXY decreased to 97.86, the lowest since October 2025. Over the past 4 weeks, Dollar Index lost 2.26%, and in the last 12 months, it decreased 9.54%.

Dollar Index Hits 11-week Low

The Swedish Krona touched 9.18 against the USD, the highest since February 2022. Over the past 4 weeks, US Dollar Swedish Krona lost 3.86%, and in the last 12 months, it decreased 17.04%.

Swedish Krona Hits Near 4-year High

The Hungarian forint weakened to around 331.6 per dollar, its lowest level in about a month, after Economy Minister Márton Nagy renewed public pressure on the central bank to cut interest rates. In an interview, Nagy argued that tight monetary policy has pushed the forint to artificially strong levels and is no longer justified as inflation continues to slow. He said rate cuts would help support economic growth and ease pressure on the government budget, echoing the long-standing stance of Prime Minister Viktor Orbán’s administration. Although the central bank, under Governor Mihály Varga, has resisted political pressure and kept rates unchanged for over a year, it recently signaled openness to easing in 2026 if conditions allow. Nagy also criticized carry trades, which have boosted the forint by attracting short-term foreign capital seeking high yields, arguing such flows are unstable and do not reflect long-term confidence in the economy.

Forint Weakens as Minister Urges Rate Cuts

AUDUSD increased to 0.67, the highest since September 2025. Over the past 4 weeks, Australian Dollar US Dollar gained 3.43%, and in the last 12 months, it increased 7.19%.

Australian Dollar Hits 13-week High

The South African Rand touched 16.68 against the USD, the highest since August 2022. Over the past 4 weeks, US Dollar South African Rand lost 3.52%, and in the last 12 months, it decreased 10.57%.

South African Rand Hits 3-year High

The Japanese yen strengthened to around 155 per dollar, extending gains from the previous session, buoyed by renewed signals of potential intervention from authorities. Finance Minister Satsuki Katayama said Japan has a “free hand” in addressing excessive currency movements, marking the clearest indication yet that Tokyo could act to curb sharp fluctuations. Her remarks followed comments from top currency diplomat Atsushi Mimura, who emphasized that officials would take “appropriate” action against excessive exchange-rate volatility, reflecting concern over sharp, one-sided trends. Externally, the yen also drew support from a broadly weakening greenback amid rising expectations of two Fed rate cuts next year. Meanwhile, the government is expected to finalize the fiscal 2026 draft budget on Friday, with new debt issuance for fiscal 2026 anticipated to slightly surpass 28.6 trillion yen ($182 billion) sold during the current fiscal year.

Yen Strengthens on Fresh Intervention Hints

The offshore yuan strengthened to around 7.02 per dollar on Tuesday, hitting its highest in fifteen months, even as the People’s Bank of China signaled caution through its official guidance rate. The central bank set its daily midpoint at 7.0523, the strongest since September 2024, though below market expectations, signaling caution amid rapid gains. Meanwhile, the currency has surged over 3.8% this year, poised for its largest annual gain since 2020, supported by broad dollar weakness, easing Sino-US trade tensions, and resilient Chinese exports. Year-end demand from exporters converting foreign receipts into yuan further underpinned strength. Analysts expect the yuan to continue gradual gains in the new year, eyeing the 7-per-dollar mark, though domestic data, including slowing factory output and retail sales, suggest China’s economy faces headwinds. However, the trade surplus with the US exceeded $1 trillion in the first eleven months of the year, providing support for the currency.

Offshore Yuan Hits Fifteen-Month High

The dollar index fell toward 98 on Tuesday, its lowest since early October, amid rising expectations of more rate cuts by the Federal Reserve. Markets are currently pricing in two quarter-point rate reductions in 2026, also reinforced by President Trump's calls for lower borrowing costs. However, Fed officials remain deeply divided on the path forward. Governor Miran warned on Monday that recession risks could rise unless monetary policy is adjusted. Fed President Hammack said on Sunday that policy is currently well positioned to pause, allowing time to assess the economic impact of the 75-basis-point cuts delivered this year. Further weighing on the greenback, precious metals surged on safe-haven demand amid escalating US-Venezuela tensions. The dollar weakened notably against the Japanese yen after the Bank of Japan raised its policy rate to a three-decade high.

Dollar Weakens

The Australian dollar rose to around $0.666 on Tuesday, extending gains from the previous session, as the Reserve Bank discussed conditions for a potential future rate increase. Minutes from the RBA’s December meeting showed policymakers were assessing whether a rate hike might be needed in 2026 amid a recent rise in inflation. The RBA targets inflation at the midpoint of its 2–3% range while supporting maximum sustainable employment. Headline inflation came in at 3.8% in October 2025, up from September’s 3.6% reading, remaining above the RBA’s target and underscoring renewed price pressures. Markets are now anticipating that the rate hike could come as early as February, with the Commonwealth Bank of Australia and National Australia Bank forecasting an increase to 3.85% at the RBA’s first meeting of the year. Externally, the Australian dollar found additional support from a softer US dollar as expectations grew for two Federal Reserve rate cuts.

Australian Dollar Extends Gain

The Brazilian real weakened toward 5.60 per US dollar, sliding to August lows as political uncertainty and domestic macro risks pushed Brazil’s risk premium higher. The prospect of a renewed Bolsonaro-linked electoral cycle and recent congressional moves, including the Senate bill to reduce Jair Bolsonaro’s sentence, have clouded the outlook for policy cohesion and fiscal execution, prompting wider FX premia. These pressures were reinforced by softer activity data showing the economy entered Q4 on weaker footing, cooling growth and revenue momentum and narrowing the fiscal buffer. While the 2026 budget targets a primary surplus of 0.25% of GDP, Focus Bulletin projections continue to point to a deficit closer to 0.60% of GDP. At the same time, the central bank has kept the Selic at a restrictive 15%, leaving real rates high but offering limited support to the real as political and fiscal uncertainty dull the appeal of carry and delay confidence in the easing path.

Brazilian Real Drops to Lowest Since August

The Mexican peso strengthened past 18 per USD, its highest level since July 2024, supported by stronger than expected domestic activity, still elevated Mexican yields, and softer dollar demand. Mexico’s IGAE surprised on the upside in October with a solid monthly gain, challenging fears of a sharp domestic slowdown and easing near term pressure for aggressive rate cuts. Earlier, Banxico cut its policy rate by 25bps to 7.00% as expected but signalled a data dependent pause, indicating confidence that inflation will gradually converge toward its 3% target despite core inflation remaining above 4%. With real rates still high by global standards, Mexico continues to offer an attractive carry, supporting peso demand through short term foreign inflows. At the same time, the US dollar weakened as expectations for Fed cuts next year widened and mixed US labour and consumption data pointed to a cooling economy, further underpinning the peso’s advance.

Mexican Peso Rebounds to July Highs

The British pound strengthened to around $1.345, its highest in 11 weeks, benefiting from a weaker US dollar, as markets expect the Federal Reserve to lower interest rates at least twice next year, reducing the dollar’s yield advantage. The Bank of England delivered a widely expected 25-basis-point rate cut to 3.75% in December, with a narrow 5-4 vote underscoring persistent concerns about inflation. Although inflation eased to 3.2% in November, it remains well above the Bank’s 2% target. Governor Andrew Bailey said rates are likely to trend lower, but not as quickly as markets might hope. UK GDP grew 0.1% in the third quarter, in line with expectations, though the BoE forecasts flat growth in the final quarter. Even so, traders expect at least one further rate cut in the first half of next year. Sterling has risen over 1% this month and about 7% year-to-date.

Sterling Rises to 11-Week High

The Russian ruble was near the 78 per USD mark in December, not too far from the near-three-year high of 76.5 from earlier in the month, amid low demand for hard currency and high interest rates by the Bank of Russia. Sanctions against the Russian central bank and key businesses prevented domestic market players from transacting in hard currency, driving the dollar fixes by the CBR to plunge through the year. This was exemplified by the 96% plunge in ruble pair trading compared to before Russia's invasion of Ukraine, while data from the CBR indicated that nearly 60% of Russian exports were paid in rubles, compared to 14% in 2021. The latest sanction measures included sanctions against Lukoil and Rosneft, the country's largest oil companies, while the EU confirmed it will phase out Russian LNG by 2027. Meanwhile, the CBR cut its key rate by 50bps to 16.5% this month and hinted that increasing inflation expectations limit the room for more accommodative financial conditions.

Russian Ruble Hovers Near 5-Year High

The dollar index fell below 98.4 on Monday, moving closer to its October lows, as expectations grew that the Fed will continue to ease monetary policy. Markets are currently pricing in two interest-rate cuts in 2026, also supported by US President Trump’s calls for lower borrowing costs. However, Fed officials remain divided on the policy outlook. Cleveland Fed President Hammack said on Sunday that monetary policy is well positioned to pause, allowing time to assess the economic impact of the cumulative 75 bps of rate cuts already delivered. Meanwhile, Governor Miran reiterated last week that further easing is warranted, citing signs that inflation has cooled. Adding to the dollar’s weakness, precious metals rallied, supported by safe-haven demand amid rising geopolitical tensions between the US and Venezuela. The greenback was particularly weak against the Japanese yen, after the Bank of Japan delivered a rate hike last week, pushing borrowing costs to their highest level since 1995.

Dollar Declines

The Canadian dollar strengthened toward 1.375 per US dollar, testing its highest levels since September as Canada’s monetary and yield backdrop became relatively more supportive while the US dollar softened on mixed US data. Domestic signals remain mixed, with retail sales falling 0.2% in October but a preliminary rebound reported for November, allowing the BoC to justify a policy pause rather than an immediate cut. Inflation data reinforced that view, with headline CPI steady at 2.2% and the trimmed mean easing to a ten month low of 2.8%, strengthening confidence that price pressures are converging toward target. The Bank’s decision to hold rates at 2.25% and its assessment that policy is about the right level further tempered expectations for aggressive near term easing. In parallel, the US dollar softened as delayed labor and consumption data pointed to a cooling economy, with unemployment rising to 4.6% and retail sales stalling, narrowing relative policy support for the greenback.

Canadian Dollar Tests September Highs

The South African rand strengthened to near 16.7 per USD, the highest level since mid-August 2022, buoyed by surging prices of precious metals, particularly gold amid hopes of further US interest rate cuts and escalating geopolitical tensions. So far this year, the rand has gained more than 10% against the US dollar, underpinned by elevated commodity prices and improving domestic fundamentals. Investor confidence in South Africa’s policy framework remains high, as better alignment between monetary policy, fiscal clarity, and inflation management creates a predictable environment that attracts both domestic and foreign capital. Recent economic data reinforced this optimism, with a rise in the leading business cycle indicator and lower-than-expected consumer inflation. Headline inflation rate surprisingly eased to 3.5% in November from 3.6% in October, moving closer to the South African Reserve Bank’s new 3% target and strengthening the case for a potential rate cut next month.

South African Rand Remains Firm

The euro traded just above $1.17 in a holiday-shortened week, staying close to its strongest level since late September as policy outlooks between the ECB and the Federal Reserve continued to diverge. Last week, the European Central Bank left interest rates unchanged for a fourth straight meeting and signaled that rates are likely to remain at current levels for some time, noting that the eurozone has weathered US tariffs better than expected. Recent economic data have also surprised to the upside, prompting the ECB to upgrade its growth outlook again following a similar move in September. The central bank now forecasts eurozone growth at 1.4% in 2025, up from a prior estimate of 1.2%, while headline inflation is expected to hover around the 2% target through 2028. In contrast, softer-than-expected US inflation readings have fueled speculation that the Federal Reserve may begin cutting rates next year, lending further support to the single currency.

Euro Holds Near Two-Month High

The Indian rupee weakened to around 89.9 per USD, easing from a one-month high amid strong dollar demand and rising corporate hedging activity. The currency recovered nearly 2% last week from all-time lows, boosted by two heavy-handed interventions from the Reserve Bank of India. However, forward premiums remained high, keeping hedging costs elevated. Strong demand, extra dollar flows, and position adjustments have all pushed premiums higher, making it more expensive for companies to protect themselves and riskier for speculators. The currency has dropped more than 6% this year, making it one of the worst-performing emerging market currencies, as steep US tariffs continued to weigh on sentiment. The rupee is expected to remain under pressure until there is progress in US trade negotiations. Meanwhile, India and New Zealand struck a free-trade deal, removing or sharply cutting tariffs on most New Zealand exports to India, even as trade talks with the US and EU remain stalled.

Indian Rupee Eases from One-Month Peak

The offshore yuan held steady to around 7.04 per dollar, hovering near a three-month high, as investors assessed  the People’s Bank of China’s decision to keep loan prime rates unchanged. The central bank kept its one-year Loan Prime Rate at 3.0% and the five-year LPR at 3.5%, holding both at record lows for the seventh consecutive month at its December meeting. The PBoC also left the seven-day reverse repo rate at 1.4%, following November data that showed slower growth in retail sales and industrial output amid ongoing property-sector strains. Meanwhile, the yuan has been appreciating at a measured pace since April, guided by the central bank through reference rates to curb carry-trade benefits and protect exporters from sudden currency swings. At this pace, it is projected to reach 7 per dollar by March and finish 2026 around 6.8–6.9 if interest rates stay unchanged.

Offshore Yuan Steady After PBoC Decision

The dollar index held at 98.6 on Monday after a modest gain last week, with trading expected to be quiet this week due to the Christmas holiday. Market attention will mainly be on the advance-estimate GDP data for the third quarter, set for release on Tuesday, which will provide insights into the economy’s health and help gauge the timing of the Federal Reserve’s next interest-rate moves. Investors currently anticipate that the Fed may deliver two quarter-point rate reductions next year, supported by last week’s cooler-than-expected inflation data. Externally, traders are monitoring the yen after Bank of Japan Governor Kazuo Ueda maintained a cautious stance following a rate hike last week.

Dollar Holds Steady

The New Zealand dollar rose to around $0.577, recouping losses after touching a two-week low in the previous session, as investors reassessed the Reserve Bank's monetary policy outlook. Data last week showed that the Kiwi economy returned to growth in Q3, confirming early signs of strengthening momentum after a prolonged period of sluggish activity and further reducing the already slim likelihood of a rate cut. However, the recovery remains fragile, with gains largely driven by the primary sector rather than broad-based domestic demand. With slack still evident across the economy, the pickup in growth is seen as non-inflationary in the near term. As a result, rate-hike expectations have eased, with markets now pricing a 40% chance of a move by July down from 50%. This follows comments from RBNZ Governor Anna Breman this week that interest rates are expected to remain at current levels through 2026. The Kiwi dollar is on track for an annual gain of more than 3% in 2025.

New Zealand Dollar Rises

The Japanese yen rose to around 157 per dollar on Monday, rebounding from a four-week low hit in the previous session, as authorities signaled the possibility of intervention. Top currency diplomat Atsushi Mimura emphasized that officials would take “appropriate” action against excessive exchange-rate movements, reflecting concern over sharp, one-way trends. His comments followed remarks by Finance Minister Satsuki Katayama on Friday, who warned that Japan would respond to speculative moves in the yen, highlighting worries about surging import costs and their impact on households. The intervention watch comes in the wake of the recent Bank of Japan interest rate hike to 0.75%, marking the highest borrowing costs since 1995. The move was the central bank’s second rate hike this year, signaling a gradual shift from its ultra-loose policy. Meanwhile, the yen remained near historic lows against the euro and Swiss franc, as the rate hike did little to support the currency.

Yen Rebounds on Intervention Signals

The Japanese Yen touched 157.22 against the USD, the lowest since November 2025. Over the past 4 weeks, US Dollar Japanese Yen lost 0.19%, and in the last 12 months, it increased 0.52%.

Japanese Yen Hits 4-week Low

The Indonesian rupiah dipped toward IDR 16,750 per dollar on Friday, extending losses for a third session and hovering near its lowest level in a month. Pressure stemmed from the central bank’s dovish stance despite total rate cuts of 150bps between September 2024 and September 2025. Earlier this week, the board kept the key rate at 4.75% for a third meeting but signaled scope for further easing, citing mild inflation and the need to support growth following the recent disaster in Sumatra. The rupiah has been one of Asia’s weakest currencies so far this year, down about 4% against the dollar. To stabilize the market, the government mandated natural resource exporters retain all FX earnings in state-owned banks for at least a year starting January 1, with conversion capped at 50%. The rule has drawn pushback from some groups over liquidity concerns, as current regulations allow deposits in any domestic bank. Globally, the U.S. dollar index held near 98.4, ending the week little changed.

Rupiah Weakening Persists for 3rd Session

The Japanese yen slipped past 156 per dollar on Friday, touching an over one-week low after Bank of Japan Governor Kazuo Ueda refrained from signaling a clear path for further rate hikes, emphasizing flexibility to respond to future economic and financial developments. Ueda also noted ongoing uncertainty around the neutral interest rate, the level at which monetary policy neither stimulates nor restrains economic activity. The governor added that the BOJ is maintaining close communication with the government amid concerns over Prime Minister Sanae Takaichi’s preference for looser monetary policy. Earlier, the central bank raised its benchmark rate by 25 basis points to 0.75%, as widely expected, marking its highest level since 1995 as inflation has remained above target for an extended period. Japan’s headline inflation eased slightly to 2.9% in November from 3% in October but stayed above the BOJ’s 2% target for the 44th consecutive month, while core inflation held steady at 3%.

Yen Weakens as BOJ Signals Caution

The offshore yuan weakened to around 7.03 per dollar, retreating from an over one-year high hit in the previous session, dragged down by a weaker-than-expected daily fixing. The People’s Bank of China set the midpoint rate at 7.0550 per dollar, 172 pips weaker than Reuters’ estimate. These soft fixings have persisted since late November, highlighting the central bank’s efforts to rein in an overly rapid appreciation of the currency. Meanwhile, investors are bracing for the upcoming one-year and five-year loan prime rate decisions expected over the weekend, which may help gauge overall economic conditions. Attention is also on the Standing Committee of the 14th National People’s Congress, which is scheduled to convene its 19th session in Beijing from December 22 to 27. Despite Friday’s modest losses, the yuan remains on track to post a fourth consecutive weekly gain, marking its longest winning streak since June.

Offshore Yuan Weakens, Still Set for 4th Weekly Gain

The Australian dollar held steady around $0.661, hovering two-week lows and headed for its first weekly decline in a month, as investors awaited the Reserve Bank’s December meeting minutes for clearer guidance on the policy outlook. The minutes, due next week, are expected to provide insight into the board’s discussions on potential future tightening and its inflation concerns. Views among economists remain mixed, with some anticipating a February rate hike, while others expect rates to stay on hold unless near-term inflation surprises prompt earlier action. The November consumer price report is due January 7, with a more comprehensive December and fourth-quarter figures on January 28. A quarterly rise of 0.8% or more in trimmed mean inflation could prompt the RBA to hike rates at its February meeting. Markets wagered a 25% chance of a February move, rising to 40% from March and 70% for May.

Australian Dollar Set for Weekly Decline

The Japanese yen weakened past 155.5 per dollar on Friday, extending recent losses as investors positioned cautiously ahead of the Bank of Japan’s upcoming policy decision. The central bank is widely expected to raise its policy rate by 25 basis points to 0.75% as inflation stays above the central bank’s 2% target. Japan’s headline inflation eased slightly to 2.9% in November from 3% in October but stayed above the BOJ’s target for the 44th consecutive month, while core inflation held steady at 3%. Market attention is focused on Governor Kazuo Ueda’s post-meeting press conference for signals on whether the central bank will continue hiking rates next year. Meanwhile, Prime Minister Sanae Takaichi, a supporter of looser monetary policy, reportedly told a business lobby on Wednesday that Japan should prioritize proactive fiscal spending rather than excessive tightening to stimulate growth and boost tax revenues.

Yen Slips Ahead of BOJ Decision

The dollar index hovered around 98.4 on Friday, poised to finish the week largely unchanged as investors weighed the prospects for further Federal Reserve rate cuts next year amid soft inflation and labor market signals. November’s CPI report showed headline inflation at 2.7%, the lowest since July and below market expectations of 3.1%, while core inflation eased to 2.6%, the slowest pace since early 2021. Meanwhile, data earlier this week indicated that the unemployment rate rose to 4.6% in November, the highest level since 2021. The combination of subdued inflation and signs of a cooling labor market provides the Fed with greater flexibility to reduce rates in 2026, although markets expect policy to remain on hold in January. Meanwhile, Trump said he will soon announce the next Fed chair, who he expects will implement substantial rate cuts, with economic adviser Hassett, former Fed Governor  Warsh, and current Fed Governor Waller all viewed by markets as potential frontrunners.

Dollar Set to End Week Little Changed

The Mexican peso strengthened to $18, the highest since July 2024, following the Bank of Mexico’s decision to cut its benchmark interest rate by 25 bps to 7%, as expected. The move, part of a year-long easing cycle, signals the central bank’s confidence that inflation will gradually return to its 3% target despite persistent core inflation above 4% and a weak domestic economy. The peso’s gains were also supported by US inflation data showing easing price pressures in November. Core CPI rose 2.6% year-on-year, the slowest pace since early 2021, while headline CPI increased 2.7%, slightly under expectations. The report weighed on the dollar, reinforcing expectations that US inflation may be cooling, although caveats due to the federal government shutdown have left uncertainty over the Fed’s rate trajectory.

Mexican Peso Strengthens to July 2024 Highs

The British pound strengthened to $1.34, approaching again two-month highs, as traders digest the latest monetary policy decision from the Bank of England. The central bank lowered the bank rate by 25bps as expected, but policymakers remained divided and hinted there was limited space for more easing. The vote split was 5–4, with Governor Andrew Bailey backing a cut this time. Policymakers reiterated their guidance for a “gradual” pace of further easing. Markets are now pricing in about 62 points of easing from the central bank by the end of next year, compared to about 66 points before the decision. The rate cut, which followed pauses in September and November, comes amid easing inflation and growing signs of economic strain. UK annual inflation slowed to 3.2% in November, its lowest level in eight months and below the BoE’s 3.4% forecast. Meanwhile, GDP contracted for a second consecutive month in October, and private-sector wage growth continued to moderate.

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