Recently, while analyzing the trend of the US dollar, I noticed an interesting phenomenon. The global interest rate cut expectations are fluctuating repeatedly, and the dollar’s strength is shifting from a past one-sided rise to high-level oscillation. The underlying factors are far more complex than they appear on the surface.

First, the conclusion: the US dollar is more likely to fluctuate at high levels and trend slightly weaker over the next year, rather than collapsing outright. But this doesn’t mean there are no trading opportunities; in fact, volatility has increased.

What really influences the dollar’s rise and fall? Many people only focus on interest rate hikes and cuts, but that’s not enough. While interest rates are the most direct driver, the market has already priced in expectations, so it won’t react only when rates are actually cut. More importantly, we need to watch whether the Federal Reserve’s policy stance truly changes. Currently, employment data remains solid, and inflation is sticky, so expectations for rate cuts are repeatedly delayed. The consensus now is “slow, late, small”—rate cuts will happen, but probably not until 2027, and the magnitude won’t be large.

Besides interest rates, several other factors are secretly influencing the dollar. The supply of dollars (QE and QT), the international trade landscape, and the US’s global credit position. These three combined determine whether the dollar is truly strong. The current issue is that the de-dollarization trend is real. Central banks are reducing holdings of US Treasuries and increasing gold reserves, while the euro and renminbi are challenging the dollar’s dominance. But this is a long-term process measured in years, not something that will happen overnight.

The dollar’s strength impacts various assets. Gold moves inversely to the dollar—when the dollar weakens, gold tends to rise. In the stock market, rate cuts usually attract capital, especially into tech stocks, but if the dollar is too weak, foreign investors might shift to Europe or emerging markets. Cryptocurrencies are similar—dollar weakness generally benefits assets like Bitcoin, as people look for inflation hedges.

In terms of exchange rates, it depends on the relative policies of each country’s central bank. Japan has ended ultra-low interest rates, so the yen may appreciate, and USD/JPY could weaken. The Taiwan dollar is expected to appreciate slightly. Europe’s economy isn’t doing well, and even if the ECB cuts rates, the euro probably won’t depreciate significantly against the dollar.

If you want to profit from dollar exchange rate fluctuations, in the short term, focus on data like CPI, non-farm payrolls, and FOMC meetings, which influence rate expectations; each release can trigger volatility. For medium-term trading, use the support and resistance levels of the dollar index combined with differences in central bank policies to identify swing opportunities over weeks or months. Long-term investors might consider diversifying risk with gold, foreign exchange, and other assets during periods when the dollar is high or weakening, as such allocations can better balance overall portfolios.

The dollar index is currently oscillating between 90 and 100. It has fallen 15% from the 114 high in 2022 and nearly 9.5% for the full year of 2025, marking the largest annual decline since 2017. However, due to escalating geopolitical conflicts and safe-haven buying phases, the dollar has been supported, leading to sideways consolidation. This stalemate has lasted nearly a year, indicating that the market remains uncertain about the dollar’s future direction.

The key point is to remember that the dollar’s movement isn’t just about interest rate hikes or cuts. Policy, economic data, risk events, and global capital flows all need to be considered together. As long as new financial risks or geopolitical conflicts emerge worldwide, capital will still flow back into the dollar, the most important safe-haven currency. In the short term, the dollar’s core status remains difficult to replace, but in the long run, a multi-currency coexistence pattern is gradually taking shape.