Since the beginning of 2025, the US Dollar Index (DXY), which reflects the strength of the American currency against a basket of major global currencies, has dropped by nearly 12%, reaching a level of 97 – marking the sharpest decline in the past two decades. According to analysts at XFINE, this dynamic indicates more than just fluctuations in demand: it signals a systemic shift towards a new currency reality. Despite the Federal Reserve’s high interest rate (4.25-4.50%), the dollar continues to lose ground as investors focus less on monetary indicators and more on the political and fiscal risks that accompany the US economy.
The central paradox of the current situation is the breakdown of the traditional correlation between the Fed’s key rate and the dollar’s exchange rate. Expectations of an imminent policy pivot by the Federal Reserve – with a potential rate cut of 75–100 basis points by year-end – are already priced into the markets. Meanwhile, political statements, including those from Donald Trump, are deepening concerns over the Fed’s independence. This undermines confidence in the dollar as a “safe haven” asset and intensifies pressure on the DXY, which, according to Goldman Sachs and J.P. Morgan, may drop to 90 in 2025 and to 88-89 in 2026.
Another weakening factor is the accelerating global trend of de-dollarisation. China, India, Saudi Arabia, and other major economies are actively switching to national currencies in trade settlements, reducing the share of the dollar in their reserves, and increasing investments in gold and the Chinese yuan. According to SWIFT, the dollar’s share in global transactions fell below 52% for the first time since 2015. At the same time, US stock markets have underperformed their Asian and European counterparts (in USD terms) for the first time in five years.
Analysts at Barclays, ING, Rabobank, and XFINE point out that the dollar has lost part of its systemic function. It is now increasingly vulnerable to domestic political processes – such as pressure on the Fed from the White House, the rise of protectionist trade policies, and the structural budget deficit, which surpassed $3.3 trillion in 2025.
In this context, cautious yet decidedly bearish forecasts are emerging. Experts believe that the EUR/USD pair could reach 1.20 by the end of the year, and stabilise between 1.25 and 1.30 during 2026–2027. Forecasts for the British pound are also optimistic: TD Economics and HSBC expect it to rise to 1.38–1.42. The Japanese yen, according to Nomura and Mizuho, may strengthen to 137–139 against the dollar. The key driver behind these shifts remains the rebalancing of global trust – away from the dollar and toward other currencies and asset classes.
In conclusion, XFINE analysts state that this is not a temporary weakening, but a long-term trend. The United States is entering a stage of transformation in its currency role, where the dollar no longer dominates but competes. In this new reality, investors will need to adapt to a more complex and multipolar financial system.
