The world currency markets traded without major fluctuations last week, as the New Year holidays brought a lack of important news.
Nevertheless, the US dollar strengthened slightly against a basket of the world’s most important currencies, after a marked weakening during the previous year.
Global currency markets traded quietly last week, as there was not much new information due to the New Year holidays. In such an environment, the value of the dollar against a basket of currencies rose, after a sharp decline in 2025.
The dollar index, which measures the value of the US currency against the six most important world currencies, rose 0.4 percent last week to 98.43 points, agencies report.
The American currency also strengthened against the European one – by 0.4 percent – so the euro slipped to $1.1720. Compared to the Japanese yen, the dollar strengthened by 0.15 percent, reaching the level of 156.80 yen.
In the focus of investors at the end of last year were the minutes from the last session of the head of the US Federal Reserve (Fed), which showed that the majority supported the reduction of interest rates in December – for the third time during the year, reports Investor me. At the same time, the record also revealed significant differences in attitudes about the risks to the American economy.
While one part of Fed officials believes that the cycle of interest rate cuts should continue due to the weakness of the labor market, others believe that interest rates should be kept at current levels because inflation is still moving well above the central bank’s goal of around two percent. Because of these conflicting views, the minutes did not significantly affect market expectations regarding the future movement of interest rates.
According to the latest estimates, in 2026 Fed leaders expect one rate cut on average, while the market expects two cuts, each of 0.25 percentage points.
In 2025, the euro strengthened by more than 13 percent against the dollar
The new year began with a slight rise in the dollar index, after falling as much as 9.4 percent in 2025 – its biggest annual decline since 2017.
The weakening of the dollar last year was the result of the reduction of interest rates by the Fed, the narrowing of the difference between interest rates on the dollar and other key currencies, political uncertainty, investor concerns about the fiscal deficit, but also the issue of the independence of the central bank, given the continuous pressures of the current US President Donald Trump.
During 2025, the exchange rate of the euro against the dollar increased by 13.4 percent, while the Japanese yen strengthened by only 0.1 percent, although the Bank of Japan raised interest rates on two occasions due to increased inflation.
