DBS Group Research cut its US Dollar forecasts against most major and Asian currencies. It pointed to rising uncertainty around Federal Reserve leadership and independence, ongoing de-dollarisation, and US political risks ahead of the November midterm elections.
The note said the Dollar is getting less support from interest rate gaps and from the US economy outperforming other countries. It added that institutional credibility and politics are now driving currency moves.
DBS expects two Federal Reserve rate cuts in the second half of 2026. It also expects de-dollarisation to continue.
The report was attributed to DBS Group Research’s Philip Wee. FXStreet said the item was produced using an AI tool and reviewed by an editor, and that its Insights Team selects market observations and adds analysis.
The dollar is no longer being held up by high interest rates or a uniquely strong US economy. Instead, the market is focusing on the credibility of US institutions and on political risk. This shift suggests positioning for possible dollar weakness in the coming weeks.
Recent data has strengthened the view that the Fed could cut rates twice in the second half of 2026, after January inflation cooled to 2.8%. For traders, this makes strategies like buying put options on the U.S. Dollar Index (DXY) more appealing. A move down toward 100 on the index now looks more realistic.
As the November midterm elections get closer, political noise and uncertainty around government spending may rise. Early polling points to a tight race for Congress, which often increases market volatility. Strategies such as buying option straddles on major pairs like EUR/USD could benefit from large moves in either direction.
The gradual shift away from the dollar is another factor. Central bank reserve data for the end of 2025 showed the dollar’s share of global reserves falling to 58.1%. This long-term trend supports holding assets that tend to do well when the dollar weakens. That includes being long other currencies such as the Swiss franc, or using futures to gain exposure to gold.
The debt-ceiling standoff in 2023 showed how political gridlock can limit dollar strength. Today’s setup feels similar. That suggests any dollar rallies may be brief and could offer chances to build short positions. It also fits the view that the period of US exceptionalism may be pausing.
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