The dollar's crown is slipping, and fast

Chatgpt: Recent data shows that the US dollar index has sharply declined, measuring the strength of the dollar against a basket of other major currencies, and it fell below 103 at one point this week, marking the lowest level since July 2022. This ominous sign has persisted for years, with some critics of dollar hegemony repeatedly warning that if America's dominance continues to decline, the dollar will also fall. Compared to the increasingly scarce bullish voices for the dollar, some have suggested that with the rise of the global crypto economy, America's position as the largest beneficiary economy since World War II may be shaken.

Japan tightened its monetary policy last December, while the Federal Reserve announced a rate cut, leading to a surge in the yen and a drop in the dollar. This situation may continue, with many economists predicting that the Federal Reserve will begin cutting rates this summer by about 100 basis points. The European Central Bank is also contemplating similar changes. The dollar index will fall alongside U.S. Treasury yields, highlighting the challenges posed by the government's debt skyrocketing to $31.5 trillion.

In this complex stage, we will see signs of the Federal Reserve pushing down Treasury yields. But it is clear that the market has already reacted to the signals of the Federal Reserve reaching the conditions for interest rate cuts. Crypto assets, many of which are highly correlated with the dollar, are also affected by macroeconomic conditions. If the dollar weakens, more currency may flow into unregulated markets.

The momentum for the BRICS group's efforts to expand is still strengthening, and their main shared ideal is to establish a supranational currency that is de-dollarized, similar to the creation of the euro—although the euro has not completely replaced the dollar. The trend of currency multipolarization may continue.

Although the US dollar will remain the dominant reserve currency in the short term, our clear turning point now indicates that market forces are pushing the dollar down.