The US dollar (USD) continued to depreciate in the trading session on November 27, sliding down to near a weekly low as international investors simultaneously bet that the US Federal Reserve (FED) will start cutting interest rates in December. This change in expectations is reversing the trend of the greenback, which has maintained a strong position for many months.
According to Investing.com data, the US dollar strength index (DXY) - measuring the value of the USD against a basket of six major currencies - has fallen to about 100 points, the lowest level since mid-November. The US dollar is also on track to record its biggest week of decline in four months, according to Reuters, as investors shift capital flows to more risky assets amid cooling US Treasury yields.
The market has almost Valued more than 70% of the possibility of the FED cutting interest rates at its December policy meeting. The recent data series from cooling inflation, slowing consumption to the labor market losing momentum is reinforcing the view that the Fed has completed its tightening cycle and is ready to change direction. The expected interest rate cut in the context of other major economies still holding a cautious stance has caused the USD to lose some of its inherent advantage.
Therefore, other major currencies also increased in price simultaneously. The New Zealand Dollar (NZD) rebounded strongly after the Reserve Bank of New Zealand (RBNZ)'s decision to keep interest rates unchanged, while the euro and the British pound both recovered. The "differentiation" of monetary policy between the US and other economies is putting downward pressure on the greenback.
According to Reuters Markets experts, the current trend reflects a change in global investor sentiment - from defending against the USD to finding risks. He said: If the Fed does indeed cut interest rates in December, the USD could continue to fall to the 99-point zone. However, this decrease is more of a technical adjustment than a long-term reversal.
The weakening of the USD could have a mixed impact on the global economy. Importers will benefit from reduced costs of purchasing USD-denominated goods, while countries exporting to the US may be under pressure as conversion profits decrease. For Vietnam, the USD/VND exchange rate remains stable around 26,200 - 26,400 VND/USD. The State Bank's flexible management policy helps limit the impact of international fluctuations, while maintaining stable domestic prices.
Many experts believe that the USD may continue to be weak in the short term, but it is unlikely to collapse strongly. Despite the decline in US yields, the interest rate gap between the US and the rest of the world is still large enough to keep the USD's role in the global financial system. The greenback may slow down, but it has not lost its position, said an analyst at Investing.com.
The USD is facing a pivotal period as expectations for US monetary policy have changed strongly. If the Fed officially starts a rate cutting cycle, 2026 could mark the return of a softer financial environment where the USD is less strong and capital flows are stronger into emerging markets. However, in the current uncertainty context, the dollar is still a dancer of global confidence and with just a strong signal from the Fed, the trend can reverse in just a few days.
