Dollar set for seasonal stumble as Crédit Agricole warns of year-end USD selling
The greenback’s December blues may return, with Crédit Agricole flagging a familiar pattern of year-end weakness driven by repatriation flows, exporter conversions, and a global trade backdrop that typically leans against the dollar. USD/CHF is seen as particularly vulnerable, while USD/JPY and USD/CAD have historically held up better.
Seasonal bias turns against the dollar
Crédit Agricole highlights that the dollar has fallen in roughly 70% of Decembers over the past 25 years, with the trend most pronounced versus the Swiss franc. December is historically the weakest month for USD/CHF, a pattern consistent with year-end balance-sheet adjustments, thinner liquidity and defensive demand for the CHF.
The bank’s research suggests these seasonal pressures could be stronger this year. It draws parallels to flows seen in Q1 2025—when exporters front-ran shipments ahead of tariffs—triggering negative hedging and repatriation effects that weighed on the dollar.
What’s driving expected USD outflows
– Repatriation by foreign investors: Profits booked on USD-denominated equities and bonds are commonly brought home before the calendar turns, typically translating into dollar selling.
– Exporter conversions: Multinationals repatriate U.S. dollar revenues to local currencies around year-end, adding to supply.
– Trade cycle dynamics: Rising global trade volumes tend to correlate negatively with the dollar, strengthening non-USD currencies against it.
– 2025 inflows set the stage: Record foreign inflows into U.S. equities and fixed income through 2025 could amplify year-end profit-taking and conversions before 2026, a move often linked to corporate window dressing.
Cross-asset context and trading implications
Yield differentials remain pivotal, but late-December liquidity tends to thin, magnifying flow-driven moves. If risk appetite stays firm and global trade remains buoyant, seasonal pressures could tug the dollar lower into year-end—especially against low-beta and safe-haven currencies like the franc. Conversely, a rebound in U.S. yields or a risk-off shock that disproportionately supports the dollar could blunt the effect.
For traders, the seasonal pattern suggests elevated sensitivity in USD/CHF to repatriation and exporter flows, while USD/JPY and USD/CAD may be somewhat cushioned by rate differentials and terms-of-trade dynamics. Still, December’s episodic volatility can reverse abruptly on data surprises or policy headlines.
Market highlights
- Crédit Agricole sees renewed year-end dollar selling, echoing historic December seasonality.
- USD has fallen in about 70% of Decembers in the last 25 years; USD/CHF is most exposed.
- Drivers include repatriation, exporter conversions, and a trade upswing that typically weighs on USD.
- Record 2025 foreign inflows into U.S. assets may amplify year-end profit-taking and FX hedging.
- USD/JPY and USD/CAD have historically held up better than other pairs in December.
- Thin year-end liquidity can exaggerate moves; watch U.S. yields and risk sentiment into 2026.
Pairs to watch
USD/CHF
Seasonally the weakest for the dollar in December. CHF demand often benefits from defensive positioning and year-end balance-sheet constraints, making the pair sensitive to even modest repatriation flows.
USD/JPY
Less prone to December declines historically, supported by rate differentials and structural hedging behavior. However, sudden shifts in U.S. yields or policy guidance can quickly alter momentum.
USD/CAD
Historically more resilient versus other USD pairs at year-end, helped by North American trade linkages and energy dynamics. Still, repatriation and broader USD trends can exert pressure.
Context: This article provides market analysis intended for informational purposes. It does not constitute investment advice. BPayNews editors may update coverage as conditions evolve.
FAQ
Why does the dollar often weaken in December?
Year-end repatriation by investors and corporations converts USD profits into home currencies. Exporters also bring back dollar revenues, increasing USD supply. Thin liquidity can magnify these flows.
Which currency pair is most affected?
USD/CHF typically shows the strongest seasonal dollar weakness in December, reflecting defensive positioning and Swiss franc demand alongside balance-sheet effects.
Are there exceptions to December USD weakness?
Historically, USD/JPY and USD/CAD have been more resilient in December, supported by interest-rate differentials and trade/commodity dynamics, though outcomes vary year by year.
What could disrupt a year-end USD selloff?
A sharp rise in U.S. yields, a flight-to-safety episode that boosts the dollar, or data and policy surprises from the Federal Reserve could offset seasonal pressures.
How might 2025 capital flows matter for December?
Heavy foreign inflows into U.S. stocks and bonds this year set up larger profit-taking and hedging into year-end, potentially increasing USD selling as funds are repatriated before 2026.
