OCBC strategists Sim Moh Siong and Christopher Wong note that despite renewed de-dollarisation headlines and AI-related equity volatility, the Dollar remains primarily driven by US macro data and Federal Reserve expectations. Softer US inflation and sector-specific AI concerns are weighing on the Dollar, but resilient US growth and the prospect of long-end Treasuries regaining hedge value are expected to limit further USD downside, especially versus commodity and EM currencies.

US data and Fed expectations dominate

"While this revived the long-running de-dollarisation narrative – evident in the gradual two-decade shift in global FX reserves from USD toward gold and smaller reserve currencies such as AUD, CAD and CHF – near-term USD direction remains anchored to US economic momentum and its implications for the Fed’s easing cycle."

"US equities and the USD continue to lag early in 2026, while better global growth prospects and stronger non‑US equity performance reinforce the case for USD softness – particularly against commodity currencies like AUD and NZD and higher-yielding EM FX."

"Even so, we expect resilient US data to cap the extent of further USD declines."

"If signs of easing US wage and inflation pressures persist, long-end Treasuries could regain hedge value against growth risks, helping restore some of the USD’s safe-haven appeal."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)