Recently, while looking at the US dollar trend chart, I realized an interesting phenomenon—why does the dollar keep falling? Many people have asked me this question, but the logic behind it is actually much more complex than it appears on the surface.

First, the conclusion: the current trend of the dollar is not simply a one-way decline, but a repeated oscillation at high levels. From the peak of 114 in 2022 down to the current range of 90-100, the total decline is about 15%, but in recent months it has been bouncing back and forth within this range. Many believe the dollar will continue to weaken, but that judgment is actually too one-sided.

What is the core reason? Essentially, it’s the repeated expectations of US interest rate cuts. Last year, the market generally anticipated rapid easing, but non-farm payroll data remained strong, and inflation proved sticky, so the Federal Reserve adopted a “slow, late, and cautious” rate cut path. The latest market expectations have shifted from rapid rate cuts to the view that rates may stay unchanged throughout 2026, with a policy shift possibly not until 2027.

But here’s a key point— the Fed’s current hawkish stance is more data-driven than the start of a new rate hike cycle. As long as employment, wages, and core inflation begin to slow in the coming quarters, policy stance could return to neutral or even easing. In other words, the reason why the dollar keeps falling might be that “it hasn’t really started to fall yet.”

Factors influencing the dollar exchange rate go far beyond interest rate policies. The supply of dollars (QE and QT), international trade deficits, the US’s global credit issues—all are at play. Especially in recent years, the trend of de-dollarization has become more apparent: Europe building its own financial systems, the launch of yuan crude oil futures, central banks increasing gold holdings and reducing US debt holdings—all these are creating structural pressure on the dollar.

However, it’s important to emphasize that de-dollarization is a slow process measured in “years,” and it won’t cause the dollar index to drop directly from 100 to 90 within 12 months. The dollar remains the world’s most important safe-haven currency; whenever financial risks or geopolitical conflicts arise, capital still flows back into the dollar.

From an asset allocation perspective, the impact of dollar movements on different investment assets varies greatly. A weakening dollar usually benefits gold (since its purchase cost becomes relatively cheaper) and also attracts capital into cryptocurrencies seeking inflation hedges. But for the stock market, a too-weak dollar might cause foreign investors to shift their funds elsewhere.

If you want to seize trading opportunities from dollar fluctuations, in the short term, focus on data like CPI, non-farm employment, and FOMC meetings, as they directly influence rate cut expectations. In the medium term, you can look at support and resistance levels of the dollar index combined with differences in central bank policies across countries to find swing trade opportunities. Long-term investors can diversify risk through gold, forex, and other assets, especially during periods of high dollar oscillation or weakening, which can help balance the overall portfolio.

Ultimately, why is the dollar always falling? It’s less about a continuous decline and more about searching for a new equilibrium point. The US economy remains relatively solid, but the global economic landscape is changing, and the dollar’s relative advantage is shrinking. This process will involve fluctuations and turbulence, but long-term structural pressures do exist. For investors, instead of waiting for a one-sided dollar trend, it’s better to proactively diversify and adjust strategies in line with this major trend.