US Dollar Faces Biggest Annual Drop in Over 20 Years

By Staff, Agencies

The US dollar is on track for its steepest yearly decline in more than two decades, Reuters reported Wednesday, as markets anticipate further Federal Reserve rate cuts while other major central banks tighten policy.

Fresh US growth data failed to shift expectations that the Fed still has room to ease, with investors pricing in around two additional rate cuts in 2026.

Goldman Sachs Chief US Economist David Mericle noted the Federal Open Market Committee may implement two more 25-basis-point reductions, but risks are tilted lower amid slowing inflation.

The dollar fell to a two-and-a-half-month low against a basket of currencies and is poised for an annual loss of nearly 10%, its worst since 2003.

Analysts cite not only monetary policy expectations but also broader concerns about US macroeconomic stability, including rising fiscal deficits, persistent trade tensions, and political uncertainty.

HSBC analysts highlighted that a widening USD risk premium reflects growing worries about Federal Reserve independence, alongside the Fed’s slight dovish bias.

With other G10 central banks largely on hold, these factors have added to downward pressure on the greenback.