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FX Update: Year-End Dollar Slide, Yen Watch, Asia Focus

FX Update: Year-End Dollar Slide, Yen Watch, Asia Focus

Xe Corporate

December 29, 2025 — 9 min read

Key takeaways

The dollar hovered near a three-month low and remained on pace for its steepest annual drop since 2017, as markets continued to price further easing ahead.¹
The yen stayed volatile after the Bank of Japan’s latest moves, with investors watching how quickly policy could tighten and how officials respond to yen weakness.² ³
China’s currency management remained in focus after the daily fixing was set at its strongest level in about 15 months, a reminder that “steady” policy can still move FX.⁴

At a glance: what moved and why

Theme	What happened	Why it mattered for FX	Practical takeaway for businesses
USD	Year-end trade kept USD soft; focus stayed on the 2026 Fed path	Rate expectations can move FX even in thin liquidity	Avoid large “all-at-once” conversions right on headline-heavy days if timing is flexible
JPY	Yen remained headline-driven as markets debated how far BoJ tightening goes	Japan policy expectations can move JPY quickly	If you have known JPY invoices, reduce last-day execution risk
CNH/CNY	China’s fixing drew attention even without a big policy surprise	CNH often trades expectations vs. signals	Build extra buffer time for Asia settlement windows
GBP/EUR	Quieter price action, but positioning stayed sensitive to upcoming 2026 data	“Quiet weeks” can still set up bigger moves	Focus on operational discipline: clean payee data and predictable payment runs
INR, ZAR	INR tested new lows; ZAR eased with metals volatility	EM FX reacts to flows, commodities, and global USD tone	Consider staged execution for larger EM exposures

The week in one paragraph

The final full week of December was shaped by year-end positioning and thin holiday liquidity. The dollar remained soft as markets looked ahead to a 2026 easing path, while the yen stayed in focus after recent Bank of Japan developments and renewed debate about further rate hikes. In Asia, China’s currency signals drew attention through the daily fixing, and in emerging markets the Indian rupee and South African rand made headlines for different reasons: FX flows and USD demand in India, and metals-driven sentiment in South Africa.¹ ³ ⁴ ⁵

US: a softer dollar into year-end

By late December, the USD narrative stayed “rate-path led.” Even without a major new policy decision last week, expectations about where US rates go in 2026 helped keep the dollar under pressure, and the USD was near a three-month low and on track for its steepest annual decline since 2017.¹

What this can mean for SMEs managing payables and receivables:

Year-end liquidity can exaggerate moves. If you only execute FX once per month, the last few business days of the year can be a surprisingly noisy time to do it.
The “next data point” matters more than usual. Early January US data often resets market pricing and can shift USD quickly.

If you manage regular international payables, some teams reduce last-minute FX stress by separating the decision into two parts:

Decide coverage (how much exposure you want open vs. fixed).
Execute predictably (pre-scheduled runs, clear approvals, fewer deadline-day payments).

If you want to build a repeatable workflow, common building blocks include international payments, scheduled payments, and batch payments, rather than ad hoc wires.

Japan: yen stayed headline-sensitive

Japan remained the biggest “headline sensitivity” story in G10 FX. Inside the BoJ there was debate about further rate hikes as officials balanced normalisation with concerns about yen weakness and the broader outlook.³

Even when the market broadly expects the BoJ to move gradually, the yen can still swing on:

how quickly tightening is discussed,
how officials talk about yen moves, and
global risk sentiment (which often spills into JPY).

A practical lens for businesses paying Japan-based suppliers:

If you have known invoices, the risk is often not “being wrong on direction,” it is being forced to convert on the one day the market spikes.
Teams that want fewer surprises often use a mix of prefunded balances (so they are not converting at the last minute) and dated coverage for larger, known payables.

China: renminbi signals stayed in focus

China’s currency management stayed on the radar after the People’s Bank of China set the daily renminbi fixing at its strongest level in about 15 months, according to the Financial Times.⁴

Why this matters even if you do not invoice in CNY:

CNH can be a regional barometer for Asia risk sentiment.
China-related signals can affect Asia supply chains, settlement windows, and pricing behaviour across multiple currencies.

Practical takeaway:

If you run Asia payments (or have Asia receivables), build extra lead time into your process so that “small surprises” do not become “urgent conversions.”

UK and euro area: quieter, but still worth watching

Last week was quieter for EUR and GBP compared with earlier December, but “quiet” does not mean “irrelevant,” especially into year-end and early January when positioning can be thin. Sterling was holding near recent highs into year-end.⁶

For businesses, the operational point is simple:

If you do not want FX to show up as a month-end fire drill, you typically need a workflow that is boring on purpose (clear payee data, predictable payment cadence, and fewer deadline-day approvals).

Emerging markets: INR and ZAR headlines

Two currencies stood out for different reasons:

India: rupee pressure and USD demand

The rupee was near record lows despite RBI action, and later that it slumped to a fresh low amid outflows and USD demand.⁵ ⁷

If you have INR exposure (directly or through suppliers), it is often worth treating larger conversions as a process problem:

staged execution (not all at once),
clear approval timing,
better predictability around due dates.

South Africa: rand and metals-driven sentiment

The rand softened as bullion prices cooled, while still being up strongly over the year.⁸

If you are exposed to commodity-linked currencies, it can help to:

map whether your exposure is one-off (a single shipment) or ongoing (regular monthly payables), and
decide whether you want to hold balances or convert per invoice.

Where FX costs creep into cross-border payments

Even in a week dominated by central bank narratives, many businesses lose more to workflow friction than to “missing the market.” Common sources of avoidable cost include:

Cost driver	What it looks like in practice	What helps
Hidden spread	You only notice after reconciliation	Use transparent pricing and confirm total cost upfront
Timing risk	Converting on the exact day everyone else is reacting to news	Prefund working balances or use staged execution
Manual errors	Rework from wrong beneficiary details	Save verified payee details and reuse
Admin overload	Too many single payments	Batch payments and run predictable payment cycles

Tools like multi-currency accounts, scheduled payments, and batch payments are often used to make execution more predictable.

Risk calendar: the next two weeks

Here are a few widely watched releases that can affect USD pricing and broader risk sentiment into early January:

Jan 5: ISM Manufacturing PMI (US)¹⁰
Jan 9: US Employment Situation¹¹
Jan 13: US Consumer Price Index¹²
Jan 15: US Import/Export Price Indexes¹³

Looking a bit further out (useful for planning large settlements):

Jan 27 to 28: FOMC meeting¹⁴
Jan 28: BoJ release timing note (minutes release date referenced in schedule)¹⁵
Feb 4 to 5: ECB monetary policy meeting and press conference¹⁶
Feb 5: BoE MPC decision¹⁷

What finance teams are doing now

If you want to reduce FX surprises without overcomplicating things, a common “week-ahead” checklist looks like:

Lock the knowns: Identify committed invoices and purchase orders for the next 30 to 60 days.
Stage the rest: If amounts are forecasted, avoid forcing a single conversion moment.
Make payment timing predictable: Schedule payouts ahead of due dates.
Reduce admin load: Batch supplier runs where possible.
Keep working balances where it helps: Hold core currencies you use regularly to avoid deadline-day conversion pressure.

FAQ

Is it “better” to convert all at once or in stages?

Many teams prefer staged execution when timing is flexible, because it reduces the risk of converting everything on a single volatile day.

Do we need to hedge every invoice?

Not usually. A common approach is to focus first on the largest and most predictable exposures, then expand coverage as process maturity improves.

What makes year-end weeks feel jumpy?

Liquidity can be thinner, and positioning adjustments can move markets more than usual, even without a single major headline.¹

Conclusion and how Xe can help

Last week’s FX story was less about one single headline and more about year-end positioning, a soft USD backdrop, and continued sensitivity in Asia, especially JPY and CNH. For many SMEs, the most effective response is usually operational: define what is “known,” reduce deadline-day execution, and make payment runs predictable.

Xe Business can support that workflow through international payments, multi-currency accounts, forwards, and tools like scheduled payments and batch payments.

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The content within this blog post is for informational purposes only and is not intended to constitute financial, legal, or tax advice. All figures and data are based on publicly available sources at the time of writing and are subject to change. Actual conditions may vary depending on location, timing, and personal circumstances. We recommend consulting official government resources or a licensed professional for the most up-to-date and personalized guidance.