The U.S. dollar’s strength is faltering, shedding 5% from its 2024 peak, as investors brace for federal reserve interest rate cuts.
With inflation cooling, Fed Chairman Jerome Powell signaled the end of rate hikes, likely beginning cuts at the Sept. 17-18 policy meeting.
As U.S. interest rates slip, the dollar’s multi-year dominance seems to be winding down.
Investors are betting on deeper cuts, and the market is already shifting. Hedge fund data shows a significant pivot, with bets on the dollar turning bearish for the first time in six months.
This marks a stark contrast from the $32.6 billion net long position in May. Aaron Hurd from State Street Global Advisors hinted at bigger cuts ahead, following Powell’s dovish tone.
In a global context, a weaker dollar could help U.S. exporters and lower costs for multinational businesses converting foreign earnings into dollars.
But the currency’s future will depend on how aggressively the Fed cuts rates—and how quickly other central banks follow suit.
Some believe the dollar’s recent tumble might have been too swift. Monex USA’s Helen Given suggests the drop could be an overreaction, even as analysts expect further declines by mid-2025.
Though the U.S. economy still seems healthier than many peers, the upcoming jobs report on Sept. 6 may provide more clarity.
Business investors remain cautious, but the Federal Reserve’s decision—and how the market reacts—will ultimately determine the dollar’s trajectory.
You May Also Like: Dollar Inches Up Amid Debate, Betting Odds Tilt Toward Trump
