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華爾街日報Dollar Dominance To End In 2026? Greenback's 'Controlled Decline' On Cards Amid Policy Uncertainty, Deficits, Rise Of Digital Assets
The U.S. dollar faces a defining year in 2026 as structural headwinds threaten its long-standing hegemony. While the greenback remains the primary global reserve currency, mounting U.S. fiscal deficits, policy uncertainty, and the rise of digital assets have analysts predicting a “controlled decline,” marking a potential end to the era of effortless dollar strength.
‘Controlled Decline’ Thesis
According to a new thematic outlook from TD Cowen, the dollar’s share of global reserves has slipped from 72% in 1999 to roughly 57% today. The report warns the dollar is at a “crossroads,” with its safe-haven status appearing strained by fiscal imbalances.
TD Cowen analysts argue the question isn’t whether the dollar will remain dominant immediately, but whether its “era of effortless strength is over.”
Aaron Hurd of State Street expects the dollar to be “lower in 2026 – and much lower in five years,” driven by waning belief in U.S. economic exceptionalism and the potential for a “massive, prolonged bear market” of 20-30%.
This structural weakness is echoed by J.P. Morgan, which holds a “net bearish” view for 2026, citing a Federal Reserve focused on labor market softness.
This bearish sentiment is reinforced by the prospect of increased hedging. As U.S. growth potentially slows, the dollar’s relative appeal could erode, prompting foreign investors to raise hedge ratios.
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Split Verdict On 2026
The path for 2026 remains fiercely debated. Morgan Stanley offers a V-shaped forecast, predicting the dollar index could fall to 94 in the second quarter of 2026 before staging a comeback to 100 by year-end.
They argue the dollar would benefit from higher-than-expected growth and interest rates, potentially fueled by fiscal stimulus from the “One Big Beautiful Bill”.
J.P. Morgan sees less room for a rebound, forecasting the Euro climbing to 1.20 by December 2026, supported by Eurozone growth and fiscal expansion.
Digital Challenger
A new structural threat has emerged: digital assets. TD Cowen highlights the 2025 passage of the GENIUS Act as a watershed moment establishing a regulatory framework for stablecoins.
By allowing value to move “as freely as information,” stablecoins offer a faster, transparent alternative to traditional clearing systems. “Stablecoins are a fundamental upgrade to how money moves,” says Nathan McCauley of Anchorage Digital.
While some experts view stablecoins as a tool to retain USD dominance, the shift toward “on-chain” capital formation—forecast to reach $100 trillion in five years—represents a significant diversification away from traditional banking rails.
As of the publication of this article, the U.S. Dollar Index spot was 0.05% lower at the 97.9840 level. The currency was down 9.70% year-to-date, but up 1.29% over the last six months. Here’s a list of some ETFs tracking the dollar index that investors could consider.
| Dollar ETFs | YTD Performance | One-Year Performance |
| Invesco DB U.S. Dollar Index Bullish Fund (NYSE:UUP) | -9.07% | -7.89% |
| WisdomTree Bloomberg U.S. Dollar Bullish Fund (NYSE:USDU) | -7.66% | -6.79% |
| Invesco DB U.S. Dollar Index Bearish Fund (NYSE:UDN) | 10.25% | 9.06% |
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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