Recently, those paying attention to the US dollar exchange rate should have noticed an interesting phenomenon—the dollar's strength is no longer, but instead has fallen into a strange stalemate.

Some time ago, market expectations for rate cuts fluctuated repeatedly, shifting from hopes of quick easing to a path of "slow, late, and small," and some institutions even believe that interest rates may remain unchanged throughout 2026. But the logic behind this is actually quite clear: the current hawkish stance of the Federal Reserve is more data-driven than a new round of structural rate hikes. As long as employment, wages, and core inflation begin to slow down, policy could still shift toward neutrality or even easing.

I’ve noticed many people still using the old logic of viewing the dollar—thinking that rate cuts necessarily mean a weaker dollar. Not quite. The factors influencing the dollar exchange rate are far more complex than imagined. Interest rate differentials, risk aversion demand, global capital flows—all are acting simultaneously. Take the US dollar index as an example; it not only reflects the situation in the US itself but also depends on the relative performance of major central banks like Europe and Japan. If other countries also cut rates simultaneously, the dollar may not necessarily decline significantly because exchange rates compare "relative attractiveness."

Historically, the strength or weakness of the dollar often reverses during major economic events. During the 2008 financial crisis, capital flowed back into the dollar en masse; in 2020, during the pandemic, the dollar temporarily weakened before rebounding strongly; and the rate hike cycle of 2022-2023 even pushed the dollar index to new highs. These all demonstrate one point: looking at rate hikes or cuts alone is insufficient; policy, economy, and risk events must be considered together.

Currently, the dollar is more likely to fluctuate at high levels or weaken in a sideways correction rather than decline sharply in one direction. But this doesn’t mean the dollar will fall all the way down. As long as new financial risks or geopolitical conflicts emerge globally, capital may flow back into the dollar—it remains fundamentally the world’s most important safe-haven currency.

De-dollarization is indeed a real long-term trend, but it is a slow process measured in "years." Central banks are reducing holdings of US Treasuries and increasing gold reserves, but the dollar’s core position in global reserves and settlement systems remains difficult to replace in the short term. This will exert structural pressure on the dollar for a long time, but it won’t suddenly collapse overnight.

Regarding different assets, a weakening dollar generally benefits gold and cryptocurrencies because these assets are dollar-denominated; when the dollar depreciates, their purchasing power becomes relatively cheaper. For US stocks, rate cuts tend to encourage capital inflows, but if the dollar becomes too weak, foreign investors might shift to other markets.

Looking at major currency pairs, Japan has ended its ultra-low interest rate policy, so the yen is expected to strengthen, and USD/JPY may face downward pressure. The Taiwanese dollar is expected to appreciate during the dollar rate-cut cycle, but the magnitude won’t be too large. The euro is relatively stronger than the dollar, but since Europe’s economy is itself somewhat weak and inflation remains high, the dollar also won’t depreciate significantly.

If you want to seize trading opportunities from dollar exchange rate fluctuations, in the short term, focus on data like CPI, non-farm payrolls, and FOMC meetings that influence rate expectations. For medium- and long-term investors, using support and resistance levels of the dollar index combined with policy differences among countries can help identify swing trade opportunities. Alternatively, diversifying with gold, forex, and other assets to hedge against dollar volatility—especially as the dollar’s strength gradually cools—can better help balance your overall asset portfolio.