Singapore, December 17, 2025 – The U.S. dollar wavered near its lowest levels since early October after November labor data indicated a softening in the U.S. job market, leaving investors uncertain about the timing of future Federal Reserve rate cuts. The dollar’s performance comes amid a flurry of global central bank activity, as policymakers across Europe and Asia prepare to conclude the year with key interest rate decisions.

Dollar Index and Currency Movements

The dollar index, which tracks the U.S. currency against six major peers, rose slightly by 0.18% to 98.394 but remained near its October 3 low. The index has declined roughly 9.5% in 2025, marking its steepest annual drop since 2017.

Meanwhile, the euro weakened marginally by 0.14% to $1.173 but remained close to a 12-week high ahead of Thursday’s European Central Bank (ECB) policy meeting, where rates are expected to remain steady.

Other major currencies also moved in response to recent economic data:

• Sterling eased 0.25% to $1.3388 after UK unemployment hit its highest level since early 2021, reinforcing market expectations of a potential Bank of England (BOE) rate cut.
• Japanese yen weakened to 155.145 per dollar ahead of the Bank of Japan (BOJ) meeting, where the focus is on forward guidance for 2026 interest rates.
• Australian dollar fell 0.23% to $0.6619, while the New Zealand dollar remained at $0.57755, positioning the kiwi for a 3% gain this year and the Aussie for nearly 7%, its largest annual increase since 2020.

U.S. Labor Market Data

The U.S. economy added 64,000 jobs in November, exceeding expectations, but the unemployment rate remained at 4.6%, affected by a 43-day government shutdown that distorted the data. Analysts caution that the jobs report is “virtually unactionable” for immediate policy decisions due to the signal-to-noise ratio in the statistics.

Kieran Williams, head of Asia FX at InTouch Capital Markets, noted that policymakers will likely rely on first-quarter 2026 labor data to determine the pace of any rate cuts, suggesting March or April as a baseline for potential monetary easing.

Federal Reserve Rate Outlook

The Federal Reserve cut rates by a quarter point last week, signaling that further reductions are unlikely in the near term. While markets currently price in two rate cuts in 2026, a move in January appears improbable, with policymakers awaiting a clearer picture of inflation and economic growth.

Thomas Mathews, head of markets for Asia-Pacific at Capital Economics, said, “If CPI comes in as expected later this week, the Fed will not feel pressure to ease at the next few meetings, and even March may be too soon for a cut.”

Global Central Bank Activity

Central banks globally are ending 2025 with significant policy decisions:

• European Central Bank (ECB): Expected to hold rates steady, maintaining a cautious stance amid inflation concerns.
• Bank of England (BOE): Likely to cut rates in a closely watched vote after weak labor and wage data.
• Bank of Japan (BOJ): Expected to raise rates toward a three-decade high, with attention on forward guidance and future policy trajectories.

Strategists at Bank of America highlighted that the BOJ may struggle to provide explicit guidance on the terminal rate, with potential adjustments in early 2026 depending on currency movements and economic data.

Market Implications

The U.S. dollar’s recent decline reflects uncertainty over monetary policy paths and reinforces the influence of labor market dynamics, inflation expectations, and global central bank decisions on currency markets. Investors are closely watching both domestic and international economic indicators to gauge the future trajectory of interest rates and exchange rates.