The U.S. dollar saw its biggest annual drop in eight years in 2025; history shows that down years for the greenback often happen in pairs.
That could be welcome news for U.S. farmers in 2026. A weak U.S. dollar was seen providing a tailwind for a robust corn export pace and may have helped cushion the blow from China’s boycott of U.S. soybean purchases last year. A weak dollar is generally seen as a boon for commodities priced in the currency as well as U.S.-made goods as it makes them cheaper to users of other currencies.
The dollar, as measured by the ICE U.S. Dollar Index, which tracks the currency against a basket of six major rivals, fell by 9.4% in 2025, its biggest annual decline since 2017 and second-largest of the last two decades. Strategists at BofA Global Research studied past years when the dollar’s performance most closely resembled 2025. They found that dollar weakness continued into the following year four out of five times.
The average performance of those top five analog years would imply a further 8% downside for the dollar in 2026, said Howard Du, G-10 FX strategist at BofA, in a note on Thursday.
The top five historical analogs for 2026 are 1987, 1995, 2003, 2007 and 2018, Du said, pointing to 1995 as likely the most relevant. That’s because the fundamental backdrop – the economy and the monetary policy backdrop – in 2026 most closely resembles 1995.
“Tech-driven growth allowed the U.S. economy to see a soft landing rather than recession; the Fed proceeded to cut rates in H2 1995 despite inflation running closer to 3% than 2% at the time,” Du wrote. “In 2026, we also expect the U.S. economy to muddle through after a shutdown-driven soft patch in Q4 ’25, and the Fed to further cut rates after midyear.”
The 1995 analog alone would imply 4.2% more downside for the dollar this year, he said, similar to BofA’s forecast for the DXY to fall to a 95-handle in 2026. The dollar has been off to a firm start to begin the new year, trading Thursday at 98.92, up 0.2% on the day and at its highest since Dec.10.
Strength on Thursday came after first-time jobless claims came in weaker than expected, while Challenger, Gray & Christmas said U.S.-based employers announced 35,553 job cuts in December,the lowest since July of 2024.
Get daily market updates, sales alerts from more when you subscribe to Pro Farmer. View subscription specials.
