The US dollar is expected to remain broadly weak this year, as growing uncertainty around US economic and trade policies adds fresh downward pressure on the currency. Analysts have revised several currency forecasts, lifting expectations for the dollar against the Japanese yen while trimming projections versus the Chinese yuan and the Malaysian ringgit.
In the near term, movements in major global currencies are likely to be shaped as much by political developments as by economic fundamentals.
Europe and the UK
The euro may strengthen against the dollar in the short run, driven largely by US-specific factors. However, the outlook for the Eurozone remains fragile, with risks emerging from proposed US tariffs that could weigh on growth and trade sentiment.
Sterling faces a more challenging path. A divided Bank of England on interest rate policy, coupled with tighter fiscal conditions at home, could place pressure on the pound—particularly against currencies backed by more hawkish central banks.
Asia-Pacific currencies
The Japanese yen is expected to remain weak and volatile. Ongoing fiscal concerns and political uncertainty continue to cloud Japan’s outlook, limiting sustained gains in the currency.
By contrast, the Australian dollar is forecast to appreciate in 2026, supported by relatively strong domestic fundamentals and improved global risk appetite. The New Zealand dollar may also see upside risks this year, as supportive fiscal policy and expectations of tighter monetary policy from the Reserve Bank of New Zealand underpin sentiment.
China and Southeast Asia
China’s renminbi is likely to appreciate more rapidly in the first half of 2026, helped by key policy events and favourable seasonal trends. The Singapore dollar, meanwhile, is expected to trade largely sideways as markets reassess the future direction of Monetary Authority of Singapore policy.
The Indian rupee could see a near-term recovery, aided by seasonal inflows and supportive policy measures, while the Malaysian ringgit is expected to remain range-bound amid mixed economic signals.
Elsewhere, uncertainty surrounding the US–Mexico–Canada Agreement could introduce downside risks for the Canadian dollar, adding to volatility in North American currency markets.
