The U.S. dollar traded quietly on Wednesday as investors began positioning for potential U.S. rate cuts in 2026, a move that could pressure the greenback. Bitcoin, meanwhile, recovered part of its recent losses and hovered near a two-week high.
A strong rebound in Bitcoin helped lift risk sentiment. The cryptocurrency rose 2% to $93,633.70, extending a 6% jump from the previous session. Bitcoin had stumbled sharply at the start of December after a difficult November, where it lost more than $18,000—its biggest dollar decline since May 2021.
Analyst Tony Sycamore of IG said Bitcoin remains constructive as long as it holds above $80,537, a key support level from April. He expects a potential move toward $95,000–$100,000, after which he would adopt a more neutral stance.
Euro strengthens as dollar softens
The euro advanced after breaking above its 50-day moving average. It traded at $1.1640, up 0.12%, ahead of new manufacturing data from Europe. The currency has climbed more than 12% this year, supported by earlier tariff uncertainty and rising expectations of U.S. rate cuts.
The European Central Bank meets in two weeks and is widely expected to hold rates steady. Markets see only a one-in-four chance of easing next year. After cutting rates by 2% through June, the ECB has remained on pause, which keeps the euro supported—especially as traders price in 90 basis points of U.S. cuts before late 2026.
Aussie climbs, rupee sinks
In Asia, the Australian dollar touched $0.6584, its highest level since October 30, after GDP data came in slightly below expectations. The Reserve Bank of Australia is expected to keep rates unchanged at next week’s meeting.
India’s rupee weakened past the key 90-per-dollar level, pressured by weak trade and portfolio flows even as the country posts strong economic growth. The Japanese yen held steady at 155.70 per dollar. Markets now expect a rate hike in Japan this month, while an 85% chance of a U.S. Fed cut is priced in for next week.
Sterling edged up to $1.3235, the Swiss franc held at 0.8017 per dollar, and the New Zealand dollar traded near $0.5753.
Fed leadership uncertainty weighs on dollar outlook
Investors are also monitoring the possibility that White House economic adviser Kevin Hassett could be nominated as the next Fed chair. Hassett is seen as supportive of faster U.S. rate cuts, making some traders more bearish on the dollar. President Trump is expected to announce his pick in early 2026.
Strategists note that December is historically weak for the dollar. Deutsche Bank analyst Tim Baker expects about a 2% decline this month. The dollar index slipped 0.1% to 99.202, putting it on track for a nearly 9% drop this year.
Analysts at OCBC in Singapore also forecast a weaker dollar into 2026 as U.S. cuts narrow yield gaps with other economies.
“The thesis is simple,” said Brent Donnelly, president of Spectra Markets. “The market is heavily long dollars, the Fed chair may soon shift dovishly, fiscal conditions are poor, and rates are likely to fall. I am long EUR/USD and NZD/USD.”
