The most frequently asked question lately is: Will the US dollar rise? To be honest, there’s no simple yes or no answer, because the dollar’s movements are influenced by too many factors.

Let me start with the most straightforward points. The non-farm payroll data has remained strong in the first half of this year, and inflation has not shown a clear decline, which completely changed market expectations for the Federal Reserve. People shifted from expecting rapid easing to a "slow, late, and cautious" rate cut path, and some institutions even believe there may be no rate cuts at all this year. 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.

When it comes to whether the dollar will rise, you can’t just look at interest rate policies. Historically, every major economic event has impacted the dollar’s trend—during the 2008 financial crisis, capital flowed back into the dollar, causing a sharp appreciation; during the COVID-19 pandemic in 2020, massive liquidity injections temporarily weakened the dollar; and in 2022-2023, rapid rate hikes pushed the dollar index to a record high of 114. These cases all show one thing: the strength or weakness of the dollar results from the combined effects of policies, economic conditions, and risk events.

The current situation is this: the dollar index has been fluctuating between 90 and 100, down about 15% from its high in 2022. Geopolitical conflicts caused some short-term rebounds, but overall, it’s still mostly sideways. I personally believe that under the "slow, late, and cautious" rate path, combined with long-term de-dollarization pressures, the dollar is more likely to oscillate at high levels or weaken gradually over the next year, rather than sharply decline. But that doesn’t mean the dollar will fall all the way—whenever financial risks or geopolitical tensions arise, capital will still flow back into the dollar because it remains the world’s most important safe-haven currency.

Interestingly, whether the dollar appreciates also depends on the relative performance of its component currencies. If Europe cuts rates more slowly or Japan maintains looser policies, the dollar might stay resilient due to interest rate differentials. For example, as Japan begins to raise interest rates, capital could flow back into Japan, causing USD/JPY to weaken; the Taiwanese dollar is expected to appreciate but not by much; the euro remains relatively strong, but Europe’s economy also faces issues.

Regarding de-dollarization, it is indeed a real long-term trend, but it’s a slow process measured in years. Central banks are reducing holdings of US Treasuries and increasing gold reserves, but in the short term, the dollar’s dominant role in global reserves and settlement systems is hard to replace.

From a trading perspective, whether the dollar will rise or fall should be judged based on timeframes. In the short term, data releases like CPI, non-farm payrolls, and FOMC meetings will influence exchange rate expectations, so traders can capitalize on these fluctuations for long or short positions. For swing traders, using support and resistance levels of the dollar index combined with major central bank policy differences can help identify opportunities. Medium- and long-term investors can diversify risk by holding assets like gold, foreign exchange, and other instruments—when the dollar is at high levels or weakening, such allocations often help balance overall portfolios.

In simple terms, instead of passively waiting for the dollar to rise or fall, it’s better to plan ahead and follow the trend. The dollar’s strength or weakness directly impacts our investment returns and asset allocation. Understanding policy rhythms and data release timings is key to finding opportunities amid volatility.