FX Weekly Overview (Brazil Issue)
Dollar to reflect US economic data, Central Bank minutes, inflation in Brazil, and the Middle East
Leonel Mattos
- Currencies
The Long Decline of the Dollar May Have Begun
By: Gustian Farrow, Head of StoneX TV • Content Channels
The Long Decline of the Dollar May Have Begun
Vincent Deluard, StoneX Group’s Director of Global Macro Strategy discusses the long-term outlook for the US dollar and the forces shaping its path.
Key Takeaways
- Dollar weakness marks a shift in safe haven behavior
- Interest rate differentials and purchasing power are less supportive
- Commodity trade settlement outside the dollar is slowly expanding
A Historic Break in the Dollar’s Market Role
Deluard highlighted that 2025 brought one of the steepest early-year declines for the dollar since the end of the gold standard under Nixon. He noted “we have the worst start of the year for the dollar since we were not on the gold standard”. This shift matters because the dollar no longer rallies when equities fall, altering how investors view its role.
Shifting Fundamentals Undermine Dollar Support
The dollar benefited from aggressive Federal Reserve tightening, but those rate differentials are now narrowing. Deluard stressed that purchasing power also matters over time, pointing out that “the dollar is extremely overvalued” compared to major world cities, suggesting gradual long-term weakness.
Reserve Currency Strength Faces New Tests
While the dollar has long been the global reserve and risk-off asset, its behavior is shifting. Deluard argued that the link between market stress and dollar strength has weakened. He added that more commodity trade is now being settled in other currencies, reducing automatic demand for dollars.
Growth, Geopolitics and the Dollar’s Future Path
Looking ahead, Deluard outlined conditions for both a stronger and weaker dollar. Stronger outcomes could stem from rapid US growth and AI-driven productivity gains, while weaker outcomes may follow continued policy shifts toward industrialization and political pressure on the Fed. As he summarized, “it is possible that over time, we are seeing that share of the dollar being slowly eroded”.
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Sign up for a free Market Intelligence trial today See our financial videos hub---- Written by Gus Farrow
---- Expert: Vincent Deluard, StoneX Director of Global Macro Strategy
- Currencies
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