According to Bloomberg News, major Wall Street institutions such as Deutsche Bank, Morgan Stanley, and Goldman Sachs Group are forecasting that the U.S. dollar will resume its downward trajectory next year. In the first half of this year, the dollar recorded its steepest decline since the early 1970s due to the trade war initiated by the Trump administration. However, it has gradually stabilized over the past six months.
Nevertheless, strategists expect the dollar to weaken again in 2026 as the Federal Reserve continues to ease monetary policy, while other major central banks either keep interest rates steady or pivot toward rate hikes. This policy divergence is expected to prompt investors to sell U.S. bonds and shift funds to countries with higher yields.
As a result, numerous major investment banks and their forecasting divisions generally agree that the dollar is likely to depreciate against key currencies such as the Japanese yen, the euro, and the British pound. According to the median forecast compiled by Bloomberg, a widely monitored dollar index is projected to fall by approximately 3% by the end of 2026.
"The market has ample room to price in a more extensive rate-cutting cycle," said David Adams, head of G10 foreign exchange strategy at Morgan Stanley. The bank expects the dollar to decline by 5% in the first half of next year, indicating significant room for further depreciation.
However, the dollar's decline next year is anticipated to be more moderate and less broad-based than this year's downturn.
