Recently, people have been asking me why the US dollar keeps falling. Actually, this is a very good question, because behind it are major events such as global central bank policies, geopolitical developments, and even de-dollarization.

Let’s start with the current situation. The US Dollar Index has been sliding since its peak of 114 in 2022. Although it has been fluctuating back and forth in the 90–100 range recently, the overall trend is indeed on the weak side. In 2025, the US Dollar Index fell by nearly 9.5% for the whole year, the largest annual decline since 2017. And this year, pressure on the dollar is still there.

So why is this happening? The most direct reason is expectations for US rate cuts. After the Federal Reserve began cutting rates in September last year, the market initially expected rapid easing, but the situation has reversed now. Non-farm payroll data has continued to look strong, and inflation has not been able to cool down, so the market keeps pushing back its expectations for rate cuts. The Fed’s stance has shifted from a “quick flood of liquidity” to a rate-cut path of “slow, late, and less.”

But here’s a key point: the Fed’s current stance is driven more by data than by a brand-new cycle of rate hikes. As long as employment, wages, and core inflation begin to slow in the next few quarters, there is still a chance the policy position could turn. So the logic behind the dollar’s continued weakness is that even if rate-cut expectations are delayed, they will ultimately arrive—and that puts real pressure on the dollar’s interest rate spread advantage.

From a historical perspective, the rise and fall of the dollar has never been as simple as looking only at rate hikes or rate cuts. During the 2008 financial crisis, panic-driven capital flowed back into the dollar, causing it to appreciate sharply. During the 2020 pandemic, the US unleashed huge amounts of money, temporarily weakening the dollar, but after the economy stabilized, it rebounded again. Then in the 2022–2023 rate-hike cycle, the US Dollar Index once surged. What’s different this time is that we are entering a new phase of “high-level volatility.”

Besides interest rates, there is another deeper factor at work: de-dollarization. This is not a new topic, but it is definitely accelerating. Since the US left the gold standard, the dollar’s absolute dominance has started to loosen. The formation of the eurozone, yuan crude oil futures, and the rise of cryptocurrencies, along with actions in recent years by central banks that have reduced US Treasury holdings and increased gold purchases, are all challenging dollar hegemony.

However, it’s important to note that de-dollarization is a slow process measured in “years.” In the short term, the dollar’s core position in global reserves and the settlement system is still difficult to replace. What’s different from the past is that instead of the dollar being the one clear standout, we are now seeing a “dollar plus multiple currencies coexisting” pattern. This will create structural pressure on the dollar over a long period, but it won’t suddenly collapse.

When looking at how exchange rates affect different assets, a weaker dollar is usually beneficial for gold, cryptocurrencies, and emerging market stocks. Gold is priced in US dollars, so when the dollar depreciates, the cost of buying gold drops. Bitcoin is often called “digital gold”; when the dollar depreciates or inflation rises, it is frequently viewed as a store-of-value asset. For US stocks, rate cuts can encourage capital inflows, but if the dollar is too weak, foreign investors may shift to Europe, Japan, or emerging markets—reducing the appeal of US equities in attracting money.

Specifically for various currency pairs, the Japanese yen could strengthen because Japan ends its ultra-low interest rate policy, causing funds to return—so the dollar/yen exchange rate may decline. For the New Taiwan dollar, Taiwan’s interest rates tend to follow the dollar, but Taiwan is an export-oriented economy, and a weaker currency is generally favorable for exports. Therefore, in a US rate-cut cycle, the New Taiwan dollar is expected to appreciate, but the increase would be limited. The euro is currently stronger relative to the US dollar, but Europe’s economy is relatively weak and inflation is still high. If the European Central Bank gradually cuts rates, the dollar may weaken somewhat, but not by a large amount.

If you want to take advantage of trading opportunities from dollar exchange-rate fluctuations, in the short term you should focus on data such as CPI, non-farm employment, and FOMC meetings—things that influence rate expectations. In the medium term, you can use the US Dollar Index’s support and resistance levels, along with differences in central bank policies across countries, to look for swing-trading opportunities over the span of several weeks to a few months. In the long run, you can diversify and spread risk by holding gold, foreign exchange, and other assets to hedge against dollar volatility.

In summary, the answer to why the US dollar keeps falling comes down to three overlapping factors: expectations of rate cuts, narrowing interest rate spreads, and the de-dollarization trend. Over the next year, the dollar is more likely to show a pattern of high-level volatility and a relatively weak consolidation rather than a one-way, sharp decline. But don’t forget: whenever new financial risks or geopolitical conflicts emerge globally, capital could still flow back into the dollar, because at its core it remains the world’s most important safe-haven currency.