The US Dollar Index (DXY), which tracks the US Dollar against a basket of six major currencies, remains under pressure for a second consecutive session and trades near the 98.20 area during Tuesday’s Asian hours. The Greenback struggles to attract demand as markets increasingly downplay the risk of a broader geopolitical escalation, with tensions between the United States and Venezuela largely fading from the spotlight.
Markets look past US-Venezuela developments
Risk sentiment has stabilized after the initial shock from Washington’s large-scale military strike on Venezuela over the weekend. US President Donald Trump confirmed that Venezuelan President Nicolas Maduro and his wife were captured and flown out of the country.
On Monday, Maduro pleaded not guilty to US narco-terrorism charges, paving the way for what Bloomberg described as an unprecedented legal confrontation with wide geopolitical implications. Despite the gravity of the situation, currency markets appear to be reducing the geopolitical risk premium that had briefly supported the Dollar.
Weak manufacturing data weighs on the dollar
On the macroeconomic front, the latest US data reinforced concerns about slowing momentum in the manufacturing sector. The ISM Manufacturing PMI fell for a third straight month, declining to 47.9 in December 2025 from 48.2 in November, marking the lowest reading since October 2024 and undershooting market expectations of 48.3.
The report pointed to a deeper contraction in factory activity, driven by softer production and declining inventories.
Within the survey details, the Employment Index edged up modestly to 44.9 from 44.0, while the Prices Paid Index held steady at 58.5, suggesting inflationary pressures remain elevated even as growth momentum weakens.
Fed commentary offers limited support
Minneapolis Fed President Neel Kashkari acknowledged that inflation remains too high, though he noted it is gradually easing.
Speaking to CNBC on Monday, Kashkari said the Federal Reserve is likely operating near a neutral policy rate and warned that the unemployment rate could rise from current levels. At the same time, he expressed confidence in the broader resilience of the US economy, offering only limited support to the Dollar.
Focus shifts to US jobs data
Looking ahead, traders are positioning cautiously ahead of a busy US data calendar later this week. The spotlight will be on Friday’s Nonfarm Payrolls report, which is expected to show job gains of around 55,000.
The outcome is likely to play a decisive role in shaping near-term expectations for US monetary policy and determining whether the US Dollar can stabilize after its recent pullback.
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