The bridge to dollar weakness

Sep 23, 2025

Gautam Kalani, EM FX Strategist and Portfolio Manager, discusses why the current macro environment is creating an asymmetric opportunity to be short the dollar.

Key takeaways: 

  • Following the sharp move lower in the aftermath of Liberation Day, the US dollar has been stuck in a range over the summer. However, we believe the stars are now aligning for the next leg of dollar weakness.
  • The case for a bearish USD trade has returned, with a soft patch in recent labour market data likely to lead to looser monetary policy going forward.
  • With the dollar moving sideways over the last few months, the ‘risk premium’ for negative structural factors, such as Fed independence, has eroded.
  • These factors are creating an asymmetric opportunity to be short the dollar, with cyclical factors in place to provide a bridge to medium-term dollar weakness.

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