I have been paying close attention to the future trend of the US dollar recently and have noticed interesting disagreements in the market opinions about the dollar's direction.

Speaking of the dollar, many people still stick to the simple logic of "rise when interest rates go up, fall when interest rates go down," but the actual situation is much more complicated. I’ve observed that since last year, the Federal Reserve’s stance has become increasingly cautious. Non-farm payroll data has remained strong, and inflation stubbornly persists, which has repeatedly delayed market expectations for rate cuts. The current consensus is basically "slow, late, small"—meaning rate cuts are unlikely to happen quickly, may be delayed longer, and the magnitude will be limited.

But here’s a key point: the Fed’s current hawkish posture is more data-driven rather than the start of a new structural rate hike cycle. As long as employment, wages, and core inflation begin to slow, there’s still a chance for policy to shift toward easing. Therefore, the future trend of the dollar is not a straight line but full of variables.

From the exchange rate perspective, the US dollar index has been fluctuating between 90 and 100 for almost a year. It declined nearly 9.5% over the entire 2025 year, marking the largest annual drop since 2017, but recently, due to escalating geopolitical conflicts, a phase of safe-haven buying has pushed it slightly higher. This indicates that the dollar remains fundamentally the world’s most important safe-haven currency; whenever risk events occur, capital flows back.

I believe that in the coming year, the dollar is more likely to oscillate at high levels and weaken gradually rather than sharply depreciate in a one-way move. The key depends on the relative performance of component currencies. If Europe delays rate cuts further, and Japan adopts more accommodative policies, the dollar could maintain resilience due to interest rate differentials.

Another long-term factor not to be ignored is the de-dollarization trend. Central banks around the world are reducing holdings of US Treasuries and increasing gold reserves; the rise of the eurozone, renminbi, crude oil futures, and cryptocurrencies are all challenging dollar hegemony. But this is a slow process measured in "years," and in the short term, the dollar’s core position remains difficult to replace.

What about the impact on investments? A weakening dollar generally benefits gold and cryptocurrencies, as these assets are viewed as hedges against inflation. Conversely, if the dollar becomes too weak, it could reduce the attractiveness of US stocks, with capital possibly flowing into Europe, Japan, or emerging markets. Regarding the yen, as Japan ends its ultra-low interest rate policy, the yen is under upward pressure, and USD/JPY may depreciate. The Taiwan dollar is also expected to appreciate, but the magnitude won’t be too large. The euro’s trend is relatively complex because the European economy itself faces challenges.

If you want to seize opportunities from the dollar’s future volatility, in the short term, focus on data like CPI, non-farm employment, and FOMC meetings that influence rate expectations. In the medium to long term, you can look at support and resistance levels of the dollar index combined with policy differences among major central banks to find opportunities. A more prudent approach is to diversify dollar risk with assets like gold, forex, and other investments, especially when the dollar is oscillating at high levels or weakening, as such allocations can better balance your overall portfolio.