Lately, I’ve been watching the U.S. dollar’s trend and found that many people still have a bit of confusion about their exchange-rate forecasts for 2026. In fact, this issue is much more complicated than it looks at first glance.

To start with the conclusion: over the next year, the U.S. dollar is more likely to trade in a high-range, choppy pattern and remain somewhat weak, rather than weakening sharply in one direction. But that doesn’t mean it will keep falling continuously. As long as global financial risks emerge or geopolitical conflicts arise, capital will still flow back into the U.S. dollar, because it is still the most important safe-haven currency in nature.

Why is this the case? I’ve noticed that the Federal Reserve’s current stance feels more like it is driven by data rather than a new round of rate-hike cycle. Non-farm employment data continues to be on the strong side, inflation stickiness remains hard to bring down, and this causes the market to repeatedly push back expectations for rate cuts. The current consensus is a “slow, late, and small” path of rate cuts. Even some institutions believe that interest rates could stay unchanged throughout all of 2026, until a policy shift occurs in 2027.

But the key is this: once, over the next few quarters, employment, wages, and core inflation start to cool down, there is still a chance that the policy stance could move back toward neutral or even easing. That’s also why exchange-rate forecasts can’t just look at rate hikes or rate cuts themselves—they also need to look at changes in expectations. The market has already priced this in; it won’t wait until rate cuts are confirmed before the dollar starts weakening.

The U.S. Dollar Index is currently moving within a range of 90 to 100. Compared with the peak of 114 in 2022, it has already fallen by about 15%. But behind this number is another layer of meaning: the dollar’s exchange-rate path doesn’t depend only on the United States itself—it also depends on the policies of major central banks in Europe, Japan, and other regions. If other countries cut rates at the same time, the dollar may not fall noticeably, because exchange rates are about relative attractiveness.

The long-term trend of de-dollarization is something I think is easiest to overlook. Since the United States exited the gold standard, central banks around the world have started reducing holdings of U.S. Treasuries and increasing gold. The euro, yuan, crude oil futures, and even cryptocurrencies are all challenging the dollar’s dominance. But this is a gradual process measured in years; it won’t make the U.S. Dollar Index drop directly from 100 to 90 within 12 months. In the short term, the dollar’s core position in global reserves and settlement systems is still difficult to replace.

For specific exchange-rate forecasts, I have several observations. For USD/JPY: Japan has ended its ultra-low interest-rate policy, and possible capital inflows may push the yen higher, meaning the yen could trend upward while USD/JPY could move downward. For the Taiwanese dollar: Taiwan’s interest rates tend to follow the U.S. dollar, but Taiwan also has domestic issues—for example, if authorities want to curb housing prices, they can’t cut rates hastily. Also, Taiwan is an export-oriented country, so a lower exchange rate is beneficial for exports. Therefore, I expect the TWD to appreciate, but only modestly. For the euro: it is currently stronger than the U.S. dollar relative to it. However, Europe’s economic conditions are not great—inflation is still high but the economy is weak. If the European Central Bank gradually cuts rates, the dollar may weaken slightly, but not significantly.

If you want to capture trading opportunities from these kinds of fluctuations, in the short term you’ll need to watch data such as CPI, non-farm employment, FOMC meetings, and the dot plot—these all affect interest-rate expectations. If you’re not doing intraday trading, you can use support and resistance levels of the U.S. Dollar Index combined with policy differences across countries to look for swing opportunities over the span of 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 against risks from U.S. dollar volatility.

As for how a weaker U.S. dollar affects other assets: gold typically benefits, because gold is priced in U.S. dollars—when the dollar depreciates, the cost for buying gold becomes relatively cheaper. For U.S. stocks, rate cuts can encourage capital inflows, especially into technology and growth stocks, but if the dollar becomes too weak, foreign capital may shift to other markets. Cryptocurrencies are even more interesting: a weaker dollar means reduced purchasing power, which usually has a positive impact on crypto markets, because capital looks for assets that can hedge against inflation.

Overall, the 2026 U.S. dollar exchange-rate forecast needs to be viewed together through policy, the economy, and risk events. The dollar’s direction isn’t determined by rate hikes or rate cuts alone—it’s the result of multiple factors working together. Rather than passively waiting for exchange-rate fluctuations, it’s better to position yourself early and move along with the trend.