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The dollar started the first full trading week of 2026 near a four-week high on Monday, recovering from a weak December as investors turned their attention to a heavy slate of US economic data due later in the week.
Currency markets appeared largely unfazed by developments in Venezuela, following a US operation that led to the capture of President Nicolas Maduro. While President Donald Trump said on Sunday that further action could follow if Venezuela failed to cooperate with US demands on oil sector reforms and drug trafficking, traders remained focused on economic fundamentals rather than geopolitical risks.
Attention is firmly on Friday’s US employment report, which is expected to play a decisive role in shaping expectations for the Federal Reserve’s monetary policy path.
In early trading, the dollar rose 0.16 per cent against the Swiss franc to 0.794, while the euro fell 0.23 per cent to $1.1695.
Marc Chandler, chief market strategist at Bannockburn Global Forex, said the dollar’s recent weakness had likely run its course. He noted that after falling against major currencies in December, the greenback appeared to have bottomed out around the Christmas period, setting the stage for a near-term rebound ahead of the jobs data.
Fresh data on Monday showed that US manufacturing activity contracted more sharply than expected in December, marking the sector’s tenth consecutive month of contraction. The Institute for Supply Management said new orders declined again, while input costs continued to rise, reflecting the lingering impact of higher import tariffs.
Despite the manufacturing slowdown, Chandler said upcoming releases — including employment figures, inflation data, industrial production and retail sales — are likely to reinforce the view that the US economy is not weakening further. He added that this could keep the Federal Reserve on hold through the first quarter.
The dollar index rose to its highest level since December 10 and was last flat at 98.552. The index lost 1.2 per cent in December, its worst monthly performance since August. Futures pricing tracked by LSEG suggests traders are currently expecting two US interest rate cuts this year.
Investors are also watching closely for President Trump’s nomination for the next Federal Reserve chair, with Jerome Powell’s term ending in May. Trump has said he will announce his choice this month, adding that the new chair would favour significantly lower interest rates.
Elsewhere, Bank of Japan Governor Kazuo Ueda reiterated on Monday that the BOJ would continue raising interest rates if economic and inflation trends remain consistent with its forecasts, a stance he has maintained since last month’s rate hike to a three-decade high.
The dollar was little changed against the yen, trading at around 156.66.
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