The euro was steady at $1.1752 on the first trading day of the year after soaring 13.5% last year

The U.S. dollar made a weak start to 2026 on Friday after struggling against most currencies last year, while the yen steadied near a 10-month low as traders awaited economic data to predict how central bankers direct interest rates this year.

A narrowing interest rate difference between the U.S. and other economies cast a shadow over the market last year, resulting in most currencies gaining sharply against the dollar, with the Japanese yen an exception.

Worries about the U.S. fiscal deficit, a global trade war and concern about central bank’s independence took a toll on the dollar, and those issues are likely to linger into 2026.

The euro was steady at $1.1752 on the first trading day of the year after soaring 13.5% last year, while sterling last bought $1.3473 following a 7.7% increase in 2025. Both clocked their sharpest annual increases since 2017.

Markets in Japan and China were closed on Friday, making for light trading volume and little movement.

The dollar index, which measures the U.S. currency against six other units, was at 98.186 after registering a 9.4% decline in 2025, its biggest drop in eight years.

We have seen the peak in dollar supremacy, said Kyle Rodda, senior market analyst at Capital.com. Even so, there has not been two consecutive years of decline in the dollar index for two decades, he said.

He added: I believe its demise has been overstated and that the relative strength of the U.S. economy will mean we see it bounce back this year.