The dollar appeared poised for a third consecutive day of gains on Thursday, although the mixed signals from U.S. economic data prompted a degree of caution in the markets in anticipation of Friday’s nonfarm payrolls report. Data released on Thursday indicated that the U.S. labor market seems to be entrenched in a “no hire, no fire” condition, as job openings declined more than anticipated in November, accompanied by a slowdown in hiring activity. However, services sector activity unexpectedly picked up in December, indicating that the economy concluded 2025 on a robust note.

The dollar index, which assesses the U.S. currency relative to six competitors, increased by 0.08% to 98.807, marking its third consecutive rise. The dollar is emerging from its most challenging annual performance since 2017, with analysts forecasting an additional year of depreciation. “The U.S. economy continues to exhibit robust performance. A considerable amount of positioning in short U.S. dollar has already occurred, which I believe will hinder the dollar from experiencing significant weakness in the future,” stated Jack Janasiewicz. “I think the winners could be some emerging market currencies more than the euro or the yen,” he added.

Market participants are anticipating a minimum of two rate reductions from the Federal Reserve this year, despite a split central bank signaling in December that only one cut would occur in 2026. The Federal Reserve is anticipated to keep interest rates unchanged during its upcoming meeting this month. Markets have predominantly dismissed geopolitical anxieties following the U.S. intervention in Venezuela, directing their attention towards economic indicators instead. However, risks that President Donald Trump’s administration could face from importers if the U.S. Supreme Court this week declares his duties unlawful could resurface to negatively impact the greenback. Across the Atlantic, U.S. labor market data also did little to shift the interest rate policy debate, said Stefan Koopman. Recent inflation figures have exerted downward pressure on the euro, concurrently pushing German Bund yields to a one-month low. The single currency experienced a decline of 0.05% to $1.1670 on Thursday, following a decrease of 0.45% over the previous two sessions. “The market’s debate has tentatively shifted towards the possibility of a rate hike from the European Central Bank a year from now,” stated Rabobank’s Koopman.

“With headline inflation returning to target and core inflation showing a downward trend, justifying the anticipation of an imminent tightening cycle proves challenging.” The Japanese yen appreciated by 0.05% to 156.70 against the U.S. dollar, as market participants exhibited caution ahead of forthcoming economic data. “For those hoping for a significant appreciation of the yen, the only option for now is to wait for the conflict with China to cool down again,” stated Michael Pfister, forex strategist at Commerzbank, adding that a potential escalation through export bans on rare earths could deal a significant blow to the yen. On Thursday, Japanese chemical manufacturers’ shares declined, while Chinese counterparts rose following China’s announcement of an anti-dumping investigation into chemicals used in chip production. The Australian dollar slipped to $0.6704, just below a 15-month high, while the New Zealand dollar fell 0.13% to $0.5763.