The dollar remained steady on Wednesday, as other assets took center stage, while investors with an eye on 2026 began to adjust their positions in anticipation of U.S. rate cuts impacting the greenback. During the morning session, the Australian dollar reached a three-week peak of $0.6576, subsequently pulling back slightly following gross domestic product data that fell just short of expectations. Overnight, the euro surpassed its 50-day moving average, following euro zone inflation figures that were marginally above expectations, trading at $1.1629 early in the Asia session.

The recent movements were overshadowed by the significant recovery of bitcoin, which encouraged investors to adopt a more risk-tolerant approach. The leading cryptocurrency by market capitalization experienced an increase of approximately 6%, surpassing the $91,000 mark overnight. The Japanese yen held steady at 155.70 per dollar, as expectations for an interest rate hike this month strengthened. This stands in contrast to the U.S., where an 85% probability of a rate cut is priced in for the Federal Reserve’s upcoming meeting next week.

Sterling maintained its position at $1.3222, while the safe-haven Swiss franc remained stable at 0.8022 per dollar. The New Zealand dollar remained steady at $0.5730. Anticipations are set for approximately 90 basis points of U.S. rate reductions prior to the conclusion of 2026, alongside the potential nomination of White House economic adviser Kevin Hassett as Fed chair, leading certain investors to adopt a bearish stance on the dollar. Hassett, previously a senior economist at the Fed, is regarded as aligned with U.S. President Donald Trump’s administration and supports a more rapid decrease in U.S. interest rates. Trump indicated that he plans to announce his selection for the Federal Reserve chair position in early 2026.

Tim Baker this week indicated that there is potential for a decline of approximately 2% in the dollar by December, a month that has historically seen a decrease in the currency over the past decade. Experts at Singapore’s OCBC anticipate a declining dollar through 2026 as U.S. rate reductions diminish the disparity with global counterparts. “The thesis is quite straightforward,” stated Brent Donnelly. “The market is positioned heavily in dollars with an aggressive Fed Chair on the horizon, amidst a deteriorating fiscal landscape, elevated nominal rates poised for a decline, a seasonal pattern indicating USD weakness, and interest rate differentials at their peak.”