Dollar Climbs to Multi-Week Highs as Markets Focus on U.S. Data and Venezuela Tensions

The U.S. dollar began the first full trading week of 2026 on a firmer footing, rising to multi-week highs against major currencies after a weak December, as traders shifted their attention to a packed schedule of key U.S. economic data. The geopolitical backdrop — including the U.S. raid and capture of Venezuelan President Nicolas Maduro and fresh warnings from President Donald Trump of potential further military action — kept investors cautious, but analysts said macroeconomic signals remain the dominant driver for currency markets.

The dollar index gained for a fifth straight session, supported largely by weakness in the euro, which slipped to its lowest level since December 10. Analysts noted that while geopolitical shocks can spark initial market reactions, sustained moves are more likely to hinge on economic indicators, particularly Friday’s U.S. employment report, which is expected to shape expectations for the Federal Reserve’s policy path. Recent resilient U.S. data has prompted markets to consider the possibility of fewer-than-expected interest rate cuts this year, with attention also on upcoming ISM manufacturing figures and the wider week-long data slate.

Elsewhere, traders are watching for President Trump’s imminent nomination of the next Federal Reserve chair, with the president signalling a preference for a candidate who supports significantly lower interest rates. The dollar held steady against the yen and strengthened against the Swiss franc, Australian dollar, and New Zealand dollar, while comments from Bank of Japan Governor Kazuo Ueda reaffirming the potential for further rate hikes underscored diverging global policy trajectories. Despite geopolitical uncertainty, analysts say currency markets remain primarily tuned to U.S. economic performance and its implications for monetary policy.

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