FX.co ★ Dollar Hits Near 12-Week Low

On Wednesday, the U.S. dollar dropped to approximately 97.7, marking its lowest point since early October. This decline comes as investors increasingly anticipate that the Federal Reserve will have the opportunity to reduce rates in the coming year. Although recent data indicated robust U.S. GDP growth, it did not shift the prevailing rate outlook. The market is anticipating two rate cuts in 2026 amidst factors such as easing inflation, a cooling labor market, and President Trump's advocacy for more relaxed monetary policies, despite divided views among Fed officials. Additionally, the dollar is poised for its poorest annual performance in over twenty years, following a year highlighted by Trump's tariffs and concerns regarding his influence on the Fed's independence. Furthermore, a shift towards safe-haven assets like precious metals, rising geopolitical tensions, and gains in the yen due to the Bank of Japan's rate hike and potential governmental intervention, have intensified pressure on the dollar, supporting expectations of policy divergence and typical year-end softness.