The US dollar fell without clear catalysts. Intervention in the Asian currency market came back into focus after verbal warnings from Japanese Finance Minister Katayama and Finance Ministry top diplomat Mimura, while US Treasury Secretary Besent cited the weakness of the Korean won as inconsistent with Korea’s strong fundamentals, noted OCBC FX analysts Sim Moh Siong and Christopher Wong.
Risk-off tone pushes the dollar lower amid mixed signals from the Fed
“Despite resilient US consumer data, US stocks fell on rotation away from technology. Lower Treasury yields and higher precious metals were consistent with risk-off sentiment. The Beige Book provided early optimism for 2026, with most Fed regions reporting the first rebound in activity in a year and forecasting further improvement ahead.”
“Meanwhile, the Supreme Court once again deferred a ruling on the IEEPA tariff issue, leaving markets guessing. The Fed talk remains divided: the Minneapolis Fed’s Kashkari remained hawkish, seeing “no impetus for a rate cut in January,” while the Philadelphia Fed’s Paulson sounded dovish, calling modest cuts “likely appropriate” later this year.
“We expect limited US dollar weakness in 1H26 amid concerns about institutional and Fed independence. However, cyclical strength in US data resulting from AI-driven investing and OBBB fiscal easing could support a US currency recovery in 2H26.”
