The options market has already set up for a year-end decline, and the US dollar is feared to have its worst annual performance in eight years.

It is observed that the US dollar is on track to post its worst annual performance in eight years. The dynamics of the options market reveal that traders have already started positioning themselves for further declines in the US dollar in the last few trading days of 2025. On Tuesday, the Bloomberg Dollar Spot Index dropped by 0.3%, hitting its lowest point since October 3. Looking back over the year, the index has already fallen by a cumulative 8.2%, likely to set a record for the largest annual decline since 2017. At present, a slight additional decline in the US dollar will mark its worst annual performance in at least 20 years. The market widely expects the Federal Reserve's monetary policy to further diverge from that of other major central banks, and this expectation, combined with seasonal factors, continues to exert downward pressure on the US dollar this month. Against this backdrop, the Canadian dollar has been strengthening and reaching highs not seen since August; the Australian dollar has also been impressive, reaching its highest point in three months; and the Swedish krona has shown strong upward momentum, rising to its highest level since February 2022. Furthermore, the pricing in the options market has become increasingly pessimistic. In the options trading field, the risk reversal price spread is a key indicator of market positioning and sentiment, and currently this indicator shows that traders' bearish outlook on the US dollar for the next three months has reached a new high. According to data disclosed by the Depository Trust & Clearing Corporation (DTCC) in recent trading days, the euro and Australian dollar have become the main vehicles for expressing bearish views on the US dollar in the market. In a report released on Tuesday, Swissquote Senior Analyst Ipek Ozkardeskaya wrote: "Currently, the outlook for the US dollar remains significantly bearish, with hardly any bullish voices in the market." She further pointed out that concerns about fiscal discipline and the ongoing escalation of tensions in the trading sphere, like headwinds, are negatively impacting the US dollar's performance. However, she warned that if a series of upcoming economic data prompts the market to reevaluate expectations for Federal Reserve policy and shift towards a hawkish stance, the US dollar could easily experience a sharp rebound.