Recently, I’ve been looking at the historical trends of the US dollar exchange rate and found a very interesting pattern. From the collapse of the Bretton Woods system in the 1970s until now, the dollar has gone through eight distinct cycles, each corresponding to different economic backgrounds.

Let’s start with a few key phases of the dollar’s movement. After the gold standard was abandoned in the 1970s, the dollar entered a depreciation phase, falling below 90. In the 1980s, Fed Chairman Volcker implemented a tough high-interest-rate policy (the federal funds rate once soared to 20%) to control inflation, causing the dollar index to surge to a record high in 1985. Then, in the mid-1990s, during the Clinton era, the internet bubble strengthened the dollar again, with the index even reaching 120.

But after the internet bubble burst in 2000, the dollar entered a long-term bear market. The 9/11 attacks, quantitative easing, and the 2008 financial crisis all hit hard, pushing the dollar index down to around 60 at its lowest. After 2010, the dollar rebounded mainly due to the European debt crisis and China’s stock market crash, which made the US seem more stable.

In 2020, with the pandemic, the US cut interest rates to zero and printed money aggressively to stimulate the economy, causing the dollar index to plummet and inflation to spiral out of control. By 2022, the Fed began aggressively raising interest rates, reaching the highest in 25 years, while also shrinking its balance sheet. This indeed curbed inflation but also challenged confidence in the dollar again.

Looking ahead to the dollar’s trend in 2025, it’s quite interesting. The market was generally bearish at that time, with the dollar index falling below the 200-day moving average, briefly dropping to a low of 103.45. Weak employment data led to expectations that the Fed would cut rates frequently, which directly pressured the dollar. The logic was simple: strong rate cut expectations → falling treasury yields → reduced attractiveness of the dollar.

From a technical perspective, there was indeed potential for a rebound at that time, but the long-term trend remained weak. If the Fed continues to cut rates and economic data stay soft, the dollar index could further decline. This also explains why the euro and pound were relatively stronger during that period.

Regarding the relationship between the dollar and other currencies, the euro against the dollar is basically inverse. Improvements in ECB policies combined with dollar depreciation expectations tend to push the euro higher. The same logic applies to the pound—since the Bank of England’s rate cuts are slower than the Fed’s, the pound tends to stay relatively strong. The renminbi is more complex, as it depends on both Fed policies and China’s central bank stance. The USD/JPY situation is particularly interesting—wage growth in Japan hit a 32-year high, and the Bank of Japan may need to adjust interest rates, which could support the yen.

From the Australian dollar’s perspective, strong economic data and the Reserve Bank’s cautious stance on rate cuts support the AUD’s relative strength.

From an investment standpoint, the opportunities in dollar movements mainly focus on two timeframes. In the short term, the dollar may oscillate between 95 and 103, with geopolitical conflicts or better-than-expected US economic data potentially triggering rapid volatility. Aggressive investors might try to buy low and sell high within this range, using technical indicators to catch reversal signals. More conservative investors should wait and see until the Fed’s policy path becomes clearer.

In the medium to long term, as the Fed’s rate cut cycle deepens and US Treasury yields narrow, capital may flow elsewhere. If the global trend of de-dollarization accelerates, the dollar’s status as a reserve currency could weaken. Under such circumstances, gradually reducing dollar holdings and shifting into currencies like the yen or Australian dollar with more reasonable valuations, or allocating assets like gold and commodities as safe havens, might be better choices.

In summary, after 2025, the dollar’s trajectory will increasingly depend on data and events, requiring flexibility and discipline to seize opportunities amid volatility.