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Investment Institute

The shrinking upside in the dollar story

Our research offers three reasons why the dollar’s upside is limited, while the balance of risks increasingly point lower.

5 Sept 2025

19 minutes

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Sahil Mahtani

Chapters

01
The fast view
02
Introduction - three reasons behind shrinking upside
03
Reason 1: The US dollar is now extremely expensive
04
Reason 2: Investors unlikely to boost dollar demand
05
Reason 3: Downside risk to the dollar's position in the world
06
Conclusion
01

The fast view

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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:
    1. Valuation – starting point remains stretched.
    2. Normalisation of allocation weights – flows into US assets are set to rebalance.
    3. Shifting sentiment – growing willingness among allocators to diversify away from the dollar.

Authored by

Sahil Mahtani
Director: Investment Institute

Sahil is a Director of Ninety One’s Investment Institute. Based in London, he is responsible for...

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