The U.S. dollar entered 2026 under pressure after posting its weakest yearly performance in eight years, marking a clear shift from the dominance it enjoyed for much of the past decade. Higher U.S. interest rates, strong economic growth, and global uncertainty had long supported the dollar, but that narrative is now softening. As inflation cools and expectations around future policy adjustments grow, investors are becoming less aggressive in holding the greenback. The result is not a collapse, but a slow recalibration as markets digest a changing global balance.

At the same time, improving sentiment toward international markets has reduced the dollar’s appeal as a default safe haven. Investors are cautiously reallocating capital toward regions that may benefit from easier financial conditions and stronger growth momentum. This rotation reflects confidence rather than fear, suggesting that the dollar’s move lower is part of a broader adjustment rather than a crisis-driven reaction.