### The US Dollar: Teetering on the Edge of Decline
As of December 11, 2025, the US dollar stands at a precarious crossroads, with the Dollar Index (DXY) dipping to 98.6, marking a 0.19% daily slide and a staggering 7.81% plunge over the past year. This weakness caps a tumultuous 2025, where the greenback suffered its steepest first-half drop in over five decades—down 11% from January to June—driven by moderating US growth, fiscal deficits, and policy uncertainty. The Federal Reserve's recent 25-basis-point rate cut, alongside projections for one more in 2026, has eroded the dollar's yield appeal, fueling a bearish technical breakout below key trend lines. J.P. Morgan's analysts, turning bearish earlier this year, cite cyclical moderation and tariff-induced inflation disparities as amplifiers of this downtrend.
Looking to 2026, the outlook remains choppy yet predominantly soft. Major banks forecast a gradual erosion to the low-90s DXY by year-end, pressured by further Fed easing to neutral rates (3-3.5%) and persistent debt concerns. Morgan Stanley envisions a "wild ride": a 5% slump to 94 by mid-year amid labor softening, followed by a rebound as growth stabilizes and cuts conclude. Upside risks include robust US data or global shocks bolstering safe-haven flows, while downside could accelerate if tariffs ignite stagflation.
Ultimately, the dollar's fate hinges on balancing fiscal profligacy against resilient growth. A weaker USD may invigorate exports but strain import-dependent consumers, reshaping global trade dynamics in an era of multipolar finance.
