US dollar makes soft start to 2026

The US dollar made a slightly positive start to 2026 on Friday after struggling against most currencies last year, while the yen inched back towards a 10-month low as traders awaited US economic data to predict interest rate moves this year.

- ANKUR BANERJEE AND SAMUEL INDYK

A narrowing interest rate difference between the US and other economies cast a shadow over markets last year, resulting in sharp gains against the dollar for most major currencies, with the exception of the Japanese yen.

Worries about the US fiscal deficit, a global trade war and concern about Federal Reserve independence took a toll on the greenback, and those issues are likely to linger into 2026.

The euro was down 0.2% at $1.1725 on the first trading day of the year after surging 13.5% against the dollar last year, while sterling last bought $1.3455 following a 7.7% increase in 2025.