Lately, I've been watching the trend of the US dollar, and I realize that many people's judgments about the dollar's future are actually reversed.

Speaking of which, after the Federal Reserve started cutting interest rates in 2024, everyone thought the dollar would fall straight down. But the reality is much more complicated. The strength of the dollar depends not only on U.S. interest rate policies but also on what other central banks around the world are doing. If Europe and Japan also cut rates, the dollar might not weaken significantly because exchange rates are about relative attractiveness, not absolute values.

I've noticed an interesting phenomenon. From last year to now, the US dollar index has been fluctuating between 90 and 100, not just a one-sided decline. The logic behind this is: although the Fed is cutting rates, economic data remains resilient. Non-farm employment continues to be strong, and inflation stubbornly persists, so the market keeps delaying rate cut expectations. The current consensus is that the Fed will adopt a "slow, late, small" rate cut path, and some institutions even believe rates might stay unchanged throughout the year.

But here’s a key point: the Fed’s current hawkish stance is more data-driven than the start of a new rate hike cycle. As long as employment, wages, and core inflation begin to slow, policy could shift toward easing. This means the dollar’s trend in the medium term will likely be high-range oscillation—neither sharply weakening nor continuously appreciating.

In the long run, de-dollarization is indeed a real trend. Assets like the euro, yuan, and gold are challenging the dollar’s dominance. Many countries are starting to reduce holdings of U.S. Treasuries and increase gold reserves. But this is a slow process measured in years, not something that will cause the dollar index to drop from 100 to 90 within 12 months. The dollar’s position in global reserves and settlement systems remains difficult to replace in the short term.

Regarding the impact on different assets, my observation is this: a weakening dollar usually benefits gold because gold is priced in dollars, so a dollar decline lowers the cost to buy gold. Cryptocurrencies also benefit, as capital seeks assets that hedge against inflation. But U.S. stocks might face pressure because if the dollar becomes too weak, foreign investors may shift their funds to Europe, Japan, or emerging markets.

Specifically, for major currency pairs, the yen might appreciate as Japan ends its ultra-low interest rate policy, leading to capital inflows. The USD/JPY pair could face depreciation pressure. The Taiwan dollar is expected to appreciate during the dollar rate-cut cycle, but the magnitude won’t be large. The euro is relatively stronger than the dollar, but since Europe’s economy isn’t doing well either, the dollar probably won’t depreciate significantly.

If you want to seize short-term opportunities in dollar fluctuations, focus on data like CPI, non-farm payrolls, and FOMC meetings that influence rate expectations. Each announcement can cause short-term volatility. For swing trading, you can use support and resistance levels of the dollar index combined with differences in central bank policies worldwide to find opportunities. For medium- and long-term investors, diversifying into assets like gold and foreign exchange can help hedge dollar volatility. When the dollar is oscillating at high levels or weakening, such allocations can better balance your overall portfolio.

Honestly, instead of passively waiting for exchange rate movements, it’s better to plan ahead. You can track these hot global markets on Gate, learn more about different asset trends, and find your own investment opportunities as the dollar trend shifts.