Michael Fortune

Have you ever wondered why the dollar feels a bit weaker lately?

Well, let's break it down.

Between January 2025 and January 2026, the US dollar lost about 7% of its value against other major currencies.

That's no small change.

To give you some perspective, the nominal broad US dollar index, which measures the dollar's strength against a select group of over 20 trading partners, dropped from 129 to 120.

It's almost as if the dollar, which many once thought could only go up, is now on shaky ground.

Experts aren't all on the same page about this depreciation, though.

Some, like analysts from Morgan Stanley, anticipate that the US dollar index could shrink even further, dropping to as low as 94 in the next couple of quarters before maybe bouncing back to 100 by year's end.

Others at BNP Paribas believe the dollar will continue to slide against the euro, with federal interest rates holding steady between 3.5% and 3.75% for the entirety of 2026.

This raises an interesting debate.

Are we witnessing a structural change in the dollar's status, or is this merely a cyclical shift?

Structural factors include long-term fiscal policies and evolving global economic dynamics, while cyclical views suggest the dollar's current woes could turn around as the economy shifts.

Both sides of this debate are essential to understanding the multi-dimensional nature of the dollar's decline.

And let's not overlook the dollar's role as a safe-haven currency.

It has long been considered the go-to currency for stability.

However, recent depreciation has led many investors to rethink their portfolios and how they hedge against market volatility.

This reassessment is crucial as it impacts everything from individual investments to international trade.

In exploring this phenomenon, we turn to experts like David Adams from Morgan Stanley, who emphasizes the various factors influencing the dollar's depreciation.

Insights from BNP Paribas analysts further shed light on how economic growth and inflation trends could shape its future.

History plays a critical role in this narrative too.