Key Moments
- The Brazilian real has gained nearly 11% against the US dollar in 2026. It is supported by high carry and strong commodities.
- The Hungarian forint has risen 6.32% year-to-date. In fact, about 8% of that gain came in the last two weeks after Hungary’s election.
- Markets expect rate hikes across major central banks in 2026. However, Fed tightening still carries low probability.
Shifting Macro Landscape Favors Non-USD Currencies
At the start of 2026, FX markets expected a simple path. The US economy was slowing. The Fed was expected to cut rates twice. Meanwhile, the ECB and other central banks were expected to follow.
However, that view changed quickly after the conflict in Iran escalated. Energy prices surged. Inflation expectations also rose. As a result, central banks shifted from easing to discussing hikes.
The Federal Reserve chose to hold rates steady. It cited energy-driven inflation and uncertain growth. Therefore, policy divergence increased. This shift allowed many currencies to gain against the US dollar.
The 10 Best-Performing Currencies Against the Dollar in 2026
Brazilian Real: Carry Trade Standout
The Brazilian real leads major FX gains in 2026. It is up nearly 11% year-to-date. Two forces drive this move: high carry and strong commodities.
Brazil’s Selic rate stands at 14.75%. Even after a cut in March, the gap with the Fed remains wide. Therefore, carry trades remain highly attractive.
In addition, commodities support the real. Brazil exports soybeans, iron ore, beef, and oil. As a result, rising global prices improve its trade balance.
Together, high yield and strong exports continue to support the currency.
Australian Dollar and Norwegian Krone: Rates and Commodities
The Australian dollar and Norwegian krone also perform well. Both benefit from rate changes and commodity exposure.
The Reserve Bank of Australia has raised rates to 4.1%. Consequently, Australian yields now exceed US levels for the first time since 2017. The AUD has gained around 7% this year.
Meanwhile, the Norwegian krone has also risen nearly 7%. Norway benefits from higher oil prices. Therefore, its terms of trade have improved.
Colombia follows a similar pattern. Oil exports drive its currency. As a result, the peso tracks energy prices closely.
Hungarian Forint: Political Repricing
The Hungarian forint has gained 6.32% in 2026. However, most of the move is recent. It jumped about 8% in two weeks.
The trigger was Hungary’s election on 12 April. Viktor Orbán lost power after 16 years. Péter Magyar won a strong parliamentary majority.
This shift matters for markets. Under Orbán, tensions with the EU blocked funding. Now, relations may improve. Therefore, investors expect lower political risk.
As a result, Hungarian assets re-rated quickly. Capital inflows also increased ahead of the vote.
Underlying Theme: A Constrained Federal Reserve
Despite different drivers, one theme connects all moves. The Federal Reserve has limited flexibility due to inflation pressure.
However, other central banks have moved faster. The Reserve Bank of Australia has already tightened. In addition, several emerging and developed economies now consider hikes.
Market pricing shows a wide gap. The ECB has a 76% hike probability. The BoE stands at 57%. Meanwhile, the Fed is at only 15%.
| Institution | Hike Probability (2026) |
|---|---|
| ECB | 76% |
| BoE | 57% |
| BoC | 36% |
| Fed | 15% |
US inflation remains mixed. Energy prices drive headline inflation higher. However, core inflation stays moderate. As a result, the Fed maintains a cautious stance.
Analysts at Danske Bank note this divergence. They expect the Fed to resume cuts later in the year.
Meanwhile, Goldman Sachs sees a global shift. More central banks may tighten policy in 2026. Therefore, policy divergence remains the key FX driver.
The Fed still stands alone. It is the only major central bank expected to cut rates this year.
Key Risks and Turning Points
Oil prices remain the key risk factor. If energy prices fall, inflation pressure may ease. As a result, high-yield currencies could weaken.
However, if oil stays high, inflation may remain sticky. Therefore, central banks could stay hawkish longer.
Positioning risk is also important. Many currencies have already rallied strongly. Therefore, profit-taking could trigger volatility.
Finally, Fed communication remains critical. Any shift toward tighter policy would support the US dollar again.
Conclusion
The FX market in 2026 shows a clear shift away from dollar dominance. Instead, performance now depends on local fundamentals.
Commodities, carry trades, and politics all play a role. Therefore, currency moves are more fragmented than before.
Unless the Fed changes direction, this environment may continue. As a result, selective FX strength outside the US is likely to persist.
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