2026 FX strengths: what analysts expect.

By the OFX team | 11 February 2026 | 5 minute read

The foreign exchange story of 2025 was US dollar softness, with the USD experiencing its weakest year since 2017, with a decline of 9.7% in the US Dollar Index (DXY).

Along the way, the value of the US dollar against other currencies dropped about 11.1% in the first half of calendar 2025, the biggest decline in more than 50 years, ending a 15-year bull cycle. The headwinds of rising debt, trade policy uncertainty, a loss of confidence in “US exceptionalism” and reduced demand for US assets meant that the multi-year bull market stalled.

FX being a story of both sides of a transaction, there had to be currencies on the rise.

Which currencies surged in 2025.

Here are the top currency successes from 2025¹:

What analysts expect for 2026.

Currencies are notoriously difficult to predict, but it seems that banking on continued US dollar weakness is a popular view in 2026.

According to Japanese banking group MUFG, US dollar depreciation can be expected to extend further this year².

MUFG projects a decline of around 5% for the US dollar this year – reflecting the view of further weakness in the US labour market prompting the Federal Reserve (Fed) to cut a further three-to-four times this year – more than is currently priced by the market. The group adds that it is “also safe to assume there will be further US-policy flashpoints that will unfold this year” – some anticipated (for example, Trump’s Fed Chair pick; Supreme Court ruling-triggered trade policy uncertainties) and some unanticipated (for example, the attack on Venezuela). “While we may see some renewed trade policy uncertainties, we doubt it will reach 2025 levels and hence the global backdrop relative to the US should also prove more supportive for US dollar weakness,” MUFG says.

The Japanese group expects the euro to break above US$1.20 (it is currently US$1.18); and also the Yen to strengthen as the Bank of Japan (BoJ) “does more.” MUFG says the unfavourable policy mix (loose monetary policy and expansionary fiscal policy) continues to keep yields in Japan excessively low in real terms: “We assume the BoJ will do more to address this and added to Fed cuts, this should see USDJPY decline,” it says.

Fellow Japanese house Daiwa also expects the Yen to be a strong performer in 2026³: it expects the Japanese currency to appreciate to around 146 per USD by the end of 2026 (USDJPY currently trades at ¥157.10.)

Daiwa says the Japan–US interest rate differential will continue to narrow on a real basis, supporting yen strength and USD weakness. It sees “risk-on driven” Yen depreciation slowing, and exchange rates will move closer to levels consistent with the interest rate gap. Daiwa says downside risk for the yen comes from “strong global economic growth,” while upside risk comes from “potential US pressure to correct yen weakness.”

Based on the current 5-year and 10-year real rate differential, Daiwa estimates the USDJPY level consistent with fundamentals at around 141–144 yen, but by the end of 2026, the firm expects USDJPY “to move to a weaker USD level than that.”

Goldman Sachs also sees a strong year ahead for the yen, describing it in January as “highly undervalued.”⁴ The firm says the US dollar remains about 15% overvalued even after its sharp fall in 2025, so a “shift towards greater concern around the US labor (sic) market – from ‘jobless growth’ to ‘Sahm rule/recession’ risks – that forces the Fed to cut more deeply should see sharper depreciation, particularly versus the highly undervalued yen.”

Dutch bank ABN AMRO expects “a significant rise in EURUSD over the next two years,”⁵ to $1.25 by end-2026, and then to $1.30 by end-2027. But this is largely on the back of a weaker dollar, says the bank, and it expects a “much more modest move in the euro vs other currencies.”

The Australian dollar, it is also expected to enjoy a strong year, with Barclays⁶ saying the AUD – which has made a strong start to the year, gaining three full cents so far in 2026 to attain 70 US cents, a level last seen in February 2023 – has “emerged as the standout performer among major currencies,” driven by what the investment bank describes as the “early stages of an AI-linked commodity super-cycle” that mirrors the China-led boom of a decade ago.

In a February research note, Barclays analysts Lefteris Farmakis and Themistoklis Fiotakis indicate that surging global demand for AI infrastructure – specifically for copper, aluminium and rare earth elements – is creating a “secular tailwind” for the Australian dollar.

Recent Australian dollar gains of about 8% are “not excessive” and align with conservative estimates based on terms of trade improvements, Barclays says. If metals prices continue rising, “there is room for further upside” for the Aussie should the commodity rally extend.

How could this impact currencies?

While no forecast can predict currency markets with certainty, early signals suggest the yen, euro, and Australian dollar could show relative strength in 2026. This potential outperformance may put pressure on other major currencies, particularly those closely tied to the US dollar, and could influence global trade and investment flows.

Businesses and investors may benefit from monitoring these dynamics, as shifts in interest rates, policy decisions, and commodity demand could reshape currency performance across the broader FX landscape throughout the year.

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