US dollar projected to fall in 2026: driven more by cyclical trends than by fundamental shifts

Assessing the Dollar’s Strength Over Time

Despite frequent claims about the dollar’s weakness, it remains robust when viewed through a long-term lens. To truly gauge the dollar’s value, it’s useful to examine a trade-weighted index that accounts for differences in consumer prices—offering a ‘real’ exchange rate perspective rather than just a nominal one.

According to the Federal Reserve’s index, which tracks the dollar against 26 major trading partners, the currency’s recent decline has had minimal impact on the impressive 45% appreciation seen since 2011. This enduring strength helps explain why many investors last year continued to support the dollar’s resilience.