I’ve been closely following discussions about USD exchange-rate forecasts recently and noticed that market views on the dollar’s outlook have become increasingly complex. Many people are still asking whether the dollar will rise or fall, but the truth is that this question itself is the wrong one.

First, let’s cover a basic concept. USD exchange-rate forecasting can’t rely on just a single factor—for example, the idea that the U.S. cutting interest rates automatically means the dollar will weaken. In reality, exchange rates are the result of multiple forces pulling in different directions—interest-rate differentials, safe-haven demand, global capital flows, and geopolitics—each acting at the same time. After the U.S. began cutting rates in 2024, everyone initially thought the dollar would weaken unilaterally. So what happened? After the U.S. dollar index fell from its 2022 peak of 114, it has since been trading in a range of 90 to 100, and the entire year of 2025 saw only a 9.5% decline—nowhere near as weak as people imagined.

Why is this the case? The key lies in how rate-cut expectations keep changing. Right now, U.S. non-farm data remains relatively strong, and inflation is still hard to bring down. As a result, market expectations for the Federal Reserve have shifted from “rapid easing” to “slow, late, and small”—meaning rate cuts may come later and in smaller magnitude. Some institutions even believe that throughout 2026, interest rates could potentially be kept unchanged. But it’s important to note that the Fed’s hawkish stance is driven more by data than by some new round of rate hikes. So once employment, wages, and core inflation start to slow, policy still has the possibility of turning.

From the perspective of USD exchange-rate forecasts, the coming trend is likely to be high-range consolidation with a bias toward weakness. But this doesn’t mean the dollar will keep falling all the way down. As long as financial risks emerge globally, or geopolitical tensions intensify, or the market becomes fearful, capital will still flow back into the dollar—because it remains the world’s most important safe-haven currency. Meanwhile, the performance of the U.S. dollar index depends not only on the U.S. itself, but also on the relative performance of component currencies such as those in Europe and Japan. If Europe cuts rates more slowly or Japan adopts a more accommodative policy, the dollar could end up staying resilient due to interest-rate spreads.

Another long-term factor that shouldn’t be ignored is dedollarization. This is a real trend, but it is a gradual, year-by-year process, not something that would make the dollar index drop from 100 to 90 within 12 months. Central banks do, in fact, reduce holdings of U.S. Treasuries and increase gold holdings. However, in the short term, the dollar’s core position in global reserves and settlement systems is still difficult to replace.

It’s also worth paying attention to the impact on different assets. A weaker dollar is typically favorable for gold because gold is priced in USD—so when the dollar depreciates, the cost of buying gold falls. For U.S. equities, rate cuts tend to attract capital inflows, especially into technology and growth stocks. But if the dollar becomes too weak, foreign investors may redirect funds to Europe, Japan, or emerging markets. Cryptocurrencies usually benefit when the dollar weakens as well, since capital looks for assets that can help hedge against inflation.

Looking specifically at major currency pairs: the yen could rise because Japan has ended its ultra-low interest rate policy; the Taiwan dollar is expected to appreciate, but only modestly, due to the special nature of Taiwan’s economic structure and policy considerations; the euro may be relatively stronger than the dollar, but Europe’s economy itself also faces problems.

If you want to profit from the volatility in USD exchange-rate forecasts, in the short term you should track data such as CPI, non-farm employment, and FOMC meetings, since they directly affect rate expectations. In the medium term, you can identify trading opportunities by combining support and resistance levels of the U.S. dollar index with differences in central bank policies. Long-term investors can diversify risk by using gold, foreign exchange, and other assets to hedge against dollar fluctuations. Rather than passively waiting, it’s better to plan ahead and move along with the trend.