The US Dollar Index falls below 98.5, this time truly different: from Federal Reserve rate cuts to global asset re-pricing

The US Dollar Index DXY dipped 10 points in the short term, latest at 98.53. This figure may seem ordinary, but it reflects a profound adjustment in the global liquidity landscape. From a cumulative 9.41% decline in the US Dollar Index last year to its ongoing pressure today, the dollar is experiencing a structural weakening of credit.

Multiple Drivers Behind the Dollar’s Weakening

Easing expectations are the core

According to the latest news, the Fed’s rate cut expectations for March have risen to 47.1%, directly pushing down the dollar. The Federal Reserve has shifted from last year’s rate hike cycle to a dovish outlook, with the market generally expecting at least two rate cuts by 2026. A rate cut means lower returns on the dollar, reducing its attractiveness. This shift in expectations is driving funds away from the dollar into other assets.

Geopolitical shocks impact dollar credit

Reports indicate that geopolitical “victories” are materially impacting dollar creditworthiness. While unilateral actions may cause short-term market volatility, in the long run, such behaviors erode trust in the dollar as an “international reserve currency.” Funds are actively “fleeing” the dollar, with outflows surpassing inflows.

Asset Linkage Effects of the Dollar’s Weakening

Dollar depreciation is never an isolated event; it triggers a global re-pricing of assets:

• Gold: Achieved a 64% increase in 2025, driven by geopolitical catalysts and the dual benefits of a rate cut cycle. A weakening dollar directly reduces the holding cost of gold, and rising risk aversion further boosts gold prices.
• Silver: Intraday gains of 2.29%, supported by expanding supply-demand gaps and the dual support of a weaker dollar.
• Bitcoin: The market is beginning to realize that this rally is not just emotional speculation but a re-pricing by large funds. BTC, as a hedge against the “long-term purchasing power of the dollar,” demonstrates unique value during a dollar depreciation cycle.

Variables to Watch Moving Forward

Whether the dollar can continue to weaken depends on several evolving factors. Non-farm payroll data will be a key trigger; weak data will further boost expectations of rate cuts, negatively impacting the dollar. Meanwhile, the Bloomberg Commodity Index’s annual rebalancing could trigger tens of billions of dollars in technical sell-offs, causing short-term shocks to the dollar and other assets.

The sustainability of geopolitical factors is also worth monitoring. Single events have limited impact, but if the US continues unilateral actions, central banks’ gold accumulation—hedging against dollar risk—may provide long-term support.

Summary

Breaking below 98.5, the US Dollar Index is more than just a technical breakdown; it signals a fundamental shift in the global liquidity environment. The Fed’s policy pivot from rate hikes to cuts, geopolitical impacts on dollar credit, and market reassessment of the “long-term purchasing power of the dollar” collectively drive a structural depreciation of the dollar.

In this process, assets like gold, silver, and Bitcoin are gaining new valuation foundations. In the short term, the dollar may remain under pressure, but the real significance lies in the fact that the world is entering a new era of “relatively weak dollar and diversified assets.” For investors, the key is not to chase short-term dollar depreciation volatility but to understand the macro logic behind it and adjust asset allocations accordingly.