A case of the holiday blues caught up with the dollar's robust, near double-digit gains on the year, causing it to head into the long Christmas weekend favoring its back foot. Global trading desks were sparsely staffed, keeping volumes extremely light. After racing ahead of its rivals this year, the dollar has struggled in December, down about 2 and 4 percent against the yen and euro, respectively.
Still on course for near double-digit losses against the dollar in 2015, the euro is on track for a solid victory of about 4 percent during the month of December. Much of the euro's December dominance stems from the European Central Bank's milder policy prescriptions than markets had anticipated.The euro next year would face significant downside risk if the 19-nation economy fails to meaningfully turn the corner, which would likely hasten another round of ECB stimulus.
The loonie found a reprieve from relentless selling of late in oil's tentative rebound from multi-year lows. Any boost to the Canadian dollar looked like the momentary variety after data Wednesday showed the northern economy unexpectedly flatlined in October, evidence of a weak start to the year's final quarter.
The dollar is paying the price for being the year's top performer as the few still at their trading desk are liquidating some of their winnings to realize profit. Not many expect the dollar's December decline to lead to a lasting New Years hangover, however. Still, the dollar's fate over the coming year will be squarely in the hands of the world's biggest economy. Improving economic health would translate into higher Federal Reserve borrowing rates which would ultimately buoy the buck against its lower yielding peers.