BAKU, Azerbaijan, May 2. The US dollar could face notable depreciation over the coming year, with the Dollar Index (DXY) potentially falling to 95, Trend reports via BMI, a Fitch Solutions company.
"Over the past two years, we had long argued that the US dollar index would trade within a broad 100–108 range, but we now see a rising probability of a retreat to 95," the report notes, citing a combination of macroeconomic and policy-related pressures.
The key driver of the expected dollar weakness is a significant slowdown in US economic growth forecasted for 2025. In response, BMI expects the Federal Reserve to cut interest rates by 100 basis points, bringing the benchmark rate down to 3.50% by the end of the year.
“This repricing of interest rate expectations is placing downward pressure on the dollar,” the report states.
Another factor contributing to the dollar’s potential decline is a broader structural shift in US economic and foreign policy, including capital moving away from US assets. The report also points to political interference in monetary policy as a concern.
“President Trump’s criticism of Fed Chair Jerome Powell is weighing slightly on the ‘safe-haven’ perception of the dollar,” BMI observes.
Despite these pressures, the report suggests there is a limit to how much the DXY can fall. The upside for other major currencies such as the euro and Japanese yen remains constrained due to weak growth and export dependence in their respective economies. Additionally, BMI forecasts that the Chinese yuan will depreciate by about 10% over the next 12 months — a factor that will partially offset dollar weakness.
“While we see scope for the dollar to weaken, it is unlikely the index will fall significantly below 95,” the report concludes.
