I’ve been closely following the topic of interest rate cuts and the U.S. dollar’s trend recently, and I’ve found that the market’s view of the dollar is genuinely changing.

The interest rate-cut cycle that began in 2024 initially made everyone think the dollar would keep weakening, but the reality is not that simple. The exchange rate of the dollar depends not only on U.S. interest rates, but also on global risk sentiment, other central banks’ policies, and even geopolitical conflicts. That’s why, although the U.S. Dollar Index fell 15% from the 114 peak in 2022, it has now been trading sideways between 90 and 100, with no one-way trend for a long time.

I’ve noticed the four most critical factors: U.S. interest rate policy, the dollar supply (QE and QT), the international trade deficit, and the United States’ global influence. Among them, interest rate policy is the most direct, but investors can’t just look at rate hikes or cuts themselves—they need to consider market expectations for future policy. The Fed’s current hawkish stance is driven more by data; as long as employment, wages, and inflation start to cool, there is room for the policy stance to shift.

From a historical perspective, the dollar has gone through major appreciation during the 2008 financial crisis, a brief weakening period during the 2020 pandemic, and a rapid rate-hike cycle in 2022–2023. Each time, it’s not simply about policy—the outcome results from policy, economic conditions, and risk events working together.

Right now, the situation is that Q1 2026 non-farm employment data remains relatively strong, and inflation is also hard to bring down, so the market keeps pushing back rate-cut expectations again and again. Many institutions think the Fed may keep rates unchanged throughout the year, only turning at some point in 2027. But that doesn’t mean another round of rate hikes is coming; it’s more likely to be only a modest tightening.

Based on this “slow, late, and limited” rate path, I believe that over the next year, the dollar’s trend in the context of rate cuts is more likely to be high-range consolidation and a slight-to-moderate weakening rather than a one-direction, sharp drop. However, this doesn’t mean the dollar will keep falling. As long as global financial risks or geopolitical conflicts emerge, capital will still flow back to the dollar, because it is still fundamentally the most important safe-haven currency.

Also worth noting: de-dollarization is indeed a long-term trend, but it is a process measured in “years.” Central banks reduce holdings of U.S. Treasuries and increase gold holdings, but the dollar’s core position in global reserves and the settlement system is still difficult to replace in the short term. The current picture is more like “the dollar coexists with multiple currencies,” rather than the dollar being completely replaced.

The dollar’s movement affects different assets differently. When the dollar weakens, it is often beneficial for gold, because gold is priced in dollars—so a dollar depreciation tends to boost demand. In the stock market, rate cuts attract capital inflows, but if the dollar becomes too weak, foreign investors may rotate to other markets. Cryptocurrencies often benefit when the dollar’s purchasing power declines, because capital looks for assets that can hedge against inflation.

Looking at the major currencies: the Japanese yen could appreciate because Japan ends its ultra-low interest-rate policy; the Taiwan dollar is expected to appreciate during the U.S. dollar rate-cut cycle, but the upside may be limited; the euro is relatively strong, but the European economy itself also faces challenges.

If you want to take advantage of trading opportunities from exchange-rate volatility, in the short term you should watch data such as CPI, non-farm employment, and FOMC meetings—these influence rate-expectation outlooks. Medium- to long-term investors can use the dollar index’s support and resistance levels, combined with differences in central bank policies across countries, to find opportunities for range-bound trades. Alternatively, you can diversify by allocating to assets such as gold and foreign exchange to hedge against the risks of dollar volatility; when the dollar is consolidating at high levels or turning weaker, these allocations can help balance your overall asset portfolio.