Dollar's Losing Streak Intensifies as Fed Goes Soft While Other Central Banks Stay Hawkish

The greenback is getting hammered. After the Federal Reserve signaled a softer stance than traders expected, the U.S. dollar has crumbled to multi-month lows against most major currencies. The real kicker? While the Fed is easing, other central banks like Australia and Europe are gearing up to hike. This policy divergence is creating a perfect storm for dollar weakness.

Fed’s Dovish Turn Catches Markets Off Guard

The Fed’s latest meeting wrapped up with a 25 basis point rate cut—nothing surprising there. But here’s where it got interesting: Powell’s messaging suggested room for more cuts down the line, which caught the market off guard. Traders had positioned for a more hawkish outcome, so when the actual tone came across as softer, the dollar immediately tanked.

“The market had more hawkish-leaning expectations going into the Fed meeting,” said Vassili Serebriakov, FX strategist at UBS. Even though Powell wasn’t overtly dovish, the possibility of additional cuts was on the table. Compare that to what’s happening globally—the ECB and Reserve Bank of Australia are both hinting at rate hikes. That’s a massive spread in policy direction, and the dollar bears are loving it.

Currency Casualties Mount Across the Board

The damage was widespread. The dollar dropped 0.6% against the Swiss franc, hitting its lowest point since mid-November at 0.7947. The euro gained 0.4% to $1.1740, reaching its peak since early October. Sterling held steady at $1.3387 after touching two-month highs. Against the yen, the greenback slipped 0.3% to 155.61.

The Swiss franc benefited from the SNB’s decision to keep rates unchanged at 0%, with Chairman Martin Schlegel noting that recent U.S. tariff relief on Swiss goods brightened the outlook. Meanwhile, the Australian dollar couldn’t escape the sell-off, sliding 0.2% to $0.6663 after November employment figures showed the biggest job losses in nine months.

Labor Market Weakness Piles On

What really hammered the dollar was fresh labor data. Initial jobless claims spiked 44,000 in the week ending December 6, hitting a seasonally adjusted 236,000—the largest weekly jump in nearly four-and-a-half years. That’s a big flashing red light for the labor market’s health.

On top of that, the Fed announced it’s launching a $40 billion bond-buying program starting December 12, with another $15 billion in T-bill reinvestments from maturing mortgage-backed securities. That’s $55 billion of fresh liquidity hitting the market, which is generally terrible for the dollar but fantastic for riskier assets.

Risk Assets Get a Temporary Lift

Bitcoin felt the impact of the broader market shift. The world’s largest cryptocurrency couldn’t shake the tech selloff and dipped below $90,000 before scraping back above that level at $91,008—down 1.5% on the day. Ether got hit harder, dropping more than 4% to $3,200. At current exchange rates, if you’re converting USD to AUD, you’re looking at about 177 USD converting to Australian dollars, reflecting the broader weakness in the greenback against commodity-linked currencies.

The fundamental issue is clear: the Fed is pumping brakes while the rest of the G10 is tightening, unemployment claims are deteriorating, and new liquidity is flooding into markets. For the dollar, it’s a triple whammy of reasons to retreat. The shift in global monetary policy expectations is reshaping currency flows in real time, and the greenback is losing badly.