Chapters
01
The fast view02
Introduction - three reasons behind shrinking upside03
Reason 1: The US dollar is now extremely expensive04
Reason 2: Investors unlikely to boost dollar demand05
Reason 3: Downside risk to the dollar's position in the world06
Conclusion01
The fast view
A quick overview of the key themes in this research, highlighting why the downside risks of owning the dollar now outweigh the potential further gains.
The fast view
- We recently published research showing that dollar cycles typically last around 18 years, shaped by geopolitics, growth differentials, investment flows, and currency interventions.
- Our analysis demonstrates these cycles only turn when all four structural forces shift together within a short period.
- Turning points are rare but developments in 2025 increase the likelihood that one may be approaching.
- Whether or not 2025 proves to be the turning point, the risk-reward for owning the US dollar is no longer symmetric.
- Downside outweighs upside – the risks of weaknesses are far stronger than the case for further gains.
- Three factors underpin this view:
- Valuation – starting point remains stretched.
- Normalisation of allocation weights – flows into US assets are set to rebalance.
- Shifting sentiment – growing willingness among allocators to diversify away from the dollar.
Authored by
Sahil is a Director of Ninety One’s Investment Institute. Based in London, he is responsible for...
