I’ve been watching the U.S. dollar’s trend lately and found that this topic is far more complex than I originally imagined. Many people think that rate cuts automatically mean a weaker dollar, but it’s really not that simple.

Let’s start with the current situation. The U.S. Dollar Index has been ranging between 90 and 100 for nearly a year. After it fell from the 114 peak in 2022, the cumulative drop is about 15%. But since Q2 this year, employment data is still relatively strong, and inflation hasn’t come down as fast as people expected. Market expectations for rate cuts have been pushed back again and again. The current consensus is that the Federal Reserve will follow a “slow, late, and small” rate-cut path. Even some institutions believe that rates could be kept at the status quo throughout 2026, with a possible policy shift only in 2027.

But there’s a key point here. The Fed’s hawkish stance is driven more by data than by a new round of a structural rate-hike cycle. As long as employment and inflation start to cool in the coming quarters, there is still a chance that policy could turn toward easing. So predicting the dollar exchange-rate trend can’t rely on the surface—you have to look at the logic underneath.

As for the dollar exchange rate itself, it is essentially the exchange ratio between U.S. dollars and other currencies. For example, EUR/USD at 1.04 means 1.04 U.S. dollars can be exchanged for 1 euro. But there are many factors that truly influence exchange rates. Interest rates are obviously the most direct: higher rates attract capital into the dollar, while lower rates send capital elsewhere. But besides interest rates, the dollar’s supply, the trade deficit, geopolitical risk, and even the U.S.’s global credit standing all play a role.

That’s why you can’t look at the United States alone. If Europe also cuts rates, or if Japan continues its easing, the dollar may not weaken significantly. Exchange rates are about relative attractiveness, not absolute strength.

In the long run, de-dollarization is indeed a real trend. Central banks around the world are reducing their holdings of U.S. Treasuries, increasing gold holdings, and virtual currencies and other reserve currencies are challenging the dollar’s position. But this is a slow process measured in years—it won’t make the Dollar Index drop from 100 to 90 within 12 months. The dollar’s core position in the global settlement system is still difficult to replace in the short term.

Based on this “slow, late, and small” interest-rate path, combined with long-term factors like geopolitics and de-dollarization, I believe the dollar is more likely to experience high-range volatility and a somewhat weaker consolidation over the next year, rather than a one-direction sharp depreciation. But don’t assume the dollar will keep falling all the way down—whenever global financial risks emerge or markets turn panicky, funds will still flow back into the dollar, because it remains the most important safe-haven currency by nature.

The dollar’s movement also affects a wide range of assets, so it’s worth paying attention. Gold generally benefits when the dollar weakens, because gold’s cost becomes relatively cheaper. For U.S. stocks, rate cuts can attract capital inflows, but if the dollar gets too weak, foreign capital may shift to other markets. When the dollar weakens, cryptocurrencies usually perform relatively well, because funds look for assets to hedge against inflation.

When it comes to specific exchange rates, the Japanese yen is the one that deserves the most attention. After Japan ended its ultra-low interest-rate policy, possible capital inflows could lift the yen, meaning there’s a fairly high probability of yen appreciation and a decline in USD/JPY. The Taiwan dollar is expected to appreciate, but only modestly, because Taiwan itself has domestic issues and, as an export-oriented country, a low exchange rate is beneficial for exports. The euro’s trend is relatively stronger than the dollar, but Europe’s economy isn’t doing well either. Inflation is still high, while economic growth is weak—so the dollar is unlikely to depreciate sharply.

If you want to seize opportunities from dollar exchange-rate fluctuations, in the short term you can focus on data that affects rate expectations, such as CPI, non-farm employment, and FOMC meetings—each announcement can bring volatility. If you’re not trading intraday, you can use support and resistance levels of the dollar index, combined with differences in monetary policy among central banks, to find swing-trading opportunities over a few weeks to a few months. For medium- to long-term investors, you can use gold, foreign exchange, and other assets to diversify and hedge dollar fluctuation risk. When the dollar is consolidating at high levels or turning weaker, this kind of allocation usually helps balance the overall portfolio.

In summary, there’s no simple answer to forecasting the dollar’s exchange-rate trend. But if you can understand the underlying logic—by looking at policy, economic factors, and risk events together—you can better spot opportunities.