The US Dollar Index is grappling with a crisis of confidence. Policy uncertainty, particularly the erratic shifts in external and trade policies under the Trump administration, is accelerating the dual forces of de-dollarisation and de-globalisation. Markets are increasingly pricing in the likelihood of deeper interest rate cuts by the Federal Reserve to support a weakening US economy, adding to the pressure on the dollar.

Since November last year, our view has remained consistent: the "America First" policy framework is emerging as a catalyst for de-dollarisation through de-globalisation, and potentially marks the end of an era of American hyper-consumerism. We had also anticipated a hard decoupling in US-China trade relations — a trend that now appears to be firmly underway.

While a potential escalation in trade tensions may offer short-term support to the dollar against BRICS+ currencies, we believe that over the medium to long term, the US administration and the Federal Reserve may actively pursue a weaker dollar. The objective: to restore export competitiveness and rebalance trade.

Over the next 12 to 24 months, we expect coordinated policy efforts aimed at weakening the dollar meaningfully from current levels as part of a broader strategic reset in US economic policy. It may come at the cost of a much higher inflation over the long run and higher longer term yields