Recently, I’ve noticed a quite interesting phenomenon—everyone’s judgment on the future trend of the US dollar has become increasingly complex. The previously expected rapid rate cuts did not happen; instead, data has been continuously dragging down policy expectations, causing many to reconsider how the dollar will actually move.

First, let’s talk about the most direct point: the exchange rate of the US dollar essentially reflects the conversion ratio between the dollar and other currencies. For example, EUR/USD at 1.04 means 1.04 dollars can exchange for 1 euro. But behind this number are complex factors like global capital flows, central bank policies, and risk aversion demand. It’s not just about raising or cutting interest rates; relative attractiveness also matters.

Returning to the future trend of the dollar, my observation is this: in the first half of this year, non-farm payroll data remained strong, and inflation did not fall back quickly. The market’s expectations for the Federal Reserve have shifted from “rapid easing” to a “slow, late, and minimal” rate cut path. Some institutions even believe that rates might stay unchanged throughout the year, with a turnaround not expected until 2027.

But here’s a key point— the Fed’s current hawkish stance is more data-driven, not the start of a new rate hike cycle. As long as employment, wages, and core inflation begin to slow, there’s still a chance for policy to return to neutral or even easing.

From the perspectives of interest rate differentials, risk demand, and global capital flows, the dollar’s future is more likely to fluctuate at high levels or weaken gradually, rather than sharply depreciate in a one-sided manner. The dollar index is currently oscillating between 90 and 100, after peaking at 114 in 2022, down about 15%. But as long as financial risks or geopolitical conflicts emerge globally, capital will still flow back into the dollar because it remains fundamentally the most important safe-haven currency.

It’s also important to note that the dollar index’s movement is not only about the US itself. If Europe cuts rates more slowly or Japan maintains looser policies, the dollar could remain resilient due to relative interest rate differentials. Meanwhile, de-dollarization is indeed a long-term trend, but it’s a slow process measured in years. In the short term, the dollar’s role in global reserves and settlement systems remains hard to replace.

From an asset allocation perspective, changes in the dollar’s trend will directly impact various assets. A weakening dollar is usually favorable for gold, as gold is priced in dollars, and a dollar decline reduces the purchase cost. Cryptocurrencies also tend to perform better when the dollar weakens, as capital seeks assets to hedge against inflation. For US stocks, rate cuts attract capital inflows, but if the dollar becomes too weak, foreign investors might shift their funds to Europe or emerging markets.

Pay attention to the impact on major currency pairs as well. When Japan ends its ultra-low interest rate policy and capital flows back, the yen may appreciate, and USD/JPY could weaken. The Taiwanese dollar is expected to appreciate slightly amid US rate cuts. The euro is relatively stronger than the dollar, but Europe’s economy also faces challenges.

If you want to seize trading opportunities from these fluctuations, in the short term, focus on data like CPI, non-farm employment, and FOMC meetings that influence rate expectations. Mid-term investors can look for swing opportunities by combining support and resistance levels of the dollar index with central bank policy differences. Long-term, diversifying assets into gold, foreign exchange, and other assets can better balance the risks brought by the dollar’s future movements and stabilize the overall portfolio.

In summary, the future trend of the dollar will not be a simple one-way movement but a complex game under multiple factors. Instead of passively waiting, it’s better to proactively position based on these logical insights and follow the trend.