The US dollar is on track to end 2025 with its worst performance in eight years, having fallen by 8.2%. On December 23, the Bloomberg Dollar Index fell by 0.3%, reaching its lowest point since October 3. If this downward trend continues, the US currency risks posting its worst annual result in at least two decades.

The primary factor behind the dollar's decline is investors’ expectations of a more accommodative monetary stance from the Federal Reserve compared to other major central banks. Lower interest rates make the greenback less appealing to investors seeking yield-bearing assets. Seasonal factors at the end of the year are also exerting pressure: reduced trading activity and fewer transactions are diminishing demand for the dollar. In this environment, alternative currencies are strengthening. Both the Canadian and Australian dollars have reached multi-month highs, while the Swedish krona has returned to levels not seen since early 2022.

The options market reflects this negative sentiment, with investors increasingly betting on the appreciation of the euro and the Australian dollar. Swissquote analyst Ipek Ozkardeskaya noted that the overall outlook for the US dollar remains grim, though the situation could change with the release of new economic data that strengthens expectations for a more hawkish Federal Reserve policy.