Dollar’s Prolonged Slide Sparks Debate Over Its Longer-Term Path

Key Moments

Persistent Weakness Pressures the Greenback

As the most recent trading week drew to a close, the U.S. dollar was on track for a tenth straight session of losses. It fell against a basket of other major currencies. This streak marked an unusually long period of weakness for the greenback. It was the longest run in more than fifty years.

The downturn has shown up in the dollar index. The index is a widely watched gauge of the U.S. currency against six counterparts. Mounting expectations of another Federal Reserve rate cut have driven the index lower. Traders expect action at the upcoming policy meeting.

Fed Policy Expectations and Political Dynamics

Market participants have focused heavily on the outlook for U.S. interest rates. Expectations of further policy easing have weakened the dollar because lower rates reduce the appeal of dollar-denominated assets for yield-seeking investors.

Adding to the policy debate, media reports suggested that President Trump favors White House economic adviser Kevin Hassett to replace Fed Chair Jerome Powell. Because Hassett is a close Trump ally, analysts believe he may support the forceful and rapid rate cuts the President has repeatedly pushed to boost economic activity.

ING: Structural Risks Tilted to the Downside

Analysts at ING highlighted a cautious long-term stance on the U.S. currency in a recent note.

“We are mildly bearish on the dollar into 2026 as the Fed brings the policy rate down to neutral,” analysts at ING said in a note on Thursday, referring to the theoretical level of interest rates that neither helps nor hinders growth.

The note pointed to the possibility that political influences on monetary policy could further undermine the greenback.

“We see risks skewed to the dollar’s downside should a more politically minded Fed take U.S. real rates a lot lower or even be dragged into a scheme to target longer-dated Treasury yields.”

ING analysts added that a prolonged low-rate environment would make the dollar less attractive to investors seeking higher real returns, reducing overall demand.

Additional Long-Term Headwinds

Beyond rate policy, ING flagged several macroeconomic and global factors. These trends could weigh on the dollar over a longer horizon. They cited a faltering labor market, the rollback of President Trump’s broad-based tariffs, and “growth surprises” in economies outside the U.S. as potential drags on the currency.

Standard Chartered: Case for Long-Term Dollar Support

In contrast, Standard Chartered analysts argued that several powerful forces could support the dollar over time. In a separate note, they laid out a range of possible drivers that might help sustain or revive dollar strength over time.

They pointed to productivity gains from technology and market efficiencies as key potential supports. They also noted that strong domestic demand and higher inflation could reinforce dollar strength.

The analysts stressed that inflation-adjusted returns remain a major factor for global investors.

“Investor preference for real yield” — or the return on an investment after accounting for price gains — remains high, they said, adding that Trump’s sweeping fiscal package may stimulate “supply-side forces more than we expect.”

Summarizing their view, they wrote: “We expect the U.S. dollar positives to prevail, but the negative themes may drive markets at times,” underscoring their belief that while supportive factors may dominate over the long run, episodes of weakness like the current stretch can still emerge as markets react to shifting data and policy signals.

Contrasting Views on the Dollar’s Trajectory

The gap between ING’s bearish outlook and Standard Chartered’s more optimistic view highlights the complexity of the dollar’s future path. Interest-rate expectations, potential changes at the Federal Reserve, fiscal policy effects, and global growth dynamics are all playing into the debate.