Major Currencies Hold Range as Year-End Trading Thins; Won Extends Government-Backed Rally

Key Moments

Fed Expectations Anchor Major FX Pairs

Most major currency pairs traded in narrow ranges on Monday. Light year-end activity kept volumes low and limited price moves.

At 05:23 ET (10:23 GMT), the U.S. Dollar Index was flat on the day. The index tracks the dollar against a basket of major currencies.

Meanwhile, expectations that the Federal Reserve will continue easing policy in 2026 helped support major currencies. The outlook followed the Fed’s latest rate cut.

As a result, narrowing interest rate gaps have pressured the dollar in recent weeks. This trend has also supported emerging market and higher-yielding Asian currencies.

Investors remained focused on the Fed’s outlook for the coming year. Futures markets still price in additional rate cuts as growth slows and inflation cools.

Spot Moves in Key Pairs

South Korean Won Outperforms on Policy Support

The South Korean won stood out as a top performer on Monday. It extended last week’s sharp gains after government action.

USD/KRW traded 0.5% lower and hovered near a two-month low. The pair fell 2.5% over the previous week.

Importantly, the government signaled it would act against excessive volatility. This stance helped rebuild confidence after months of pressure on the currency.

In addition, media reports said the National Pension Fund began a new round of FX hedging. That move added further support to the won.