The dollar index (DXY), a measure of the U.S. dollar’s strength against a basket of major global currencies, dropped below 98 for the first time since early 2022.
This move signals a notable shift in global currency markets and could create a favorable environment for risk assets, especially cryptocurrencies, like bitcoin BTC.
In recent years, a DXY reading above 100 has typically reflected dollar dominance and a risk-off sentiment, often weighing on equities and digital assets. Conversely, a weakening dollar eases financial conditions, boosts global liquidity, and tends to benefit speculative assets.
Several factors are contributing to the current decline. US headline inflation came in at 2.4 percent year-over-year, slightly below the consensus estimate of 2.5 percent, strengthening market expectations for a dovish monetary policy shift.
According to the CME FedWatch Tool, markets are now pricing in a 99.8 percent probability of a rate cut at the June Federal Reserve meeting, with the target range expected to drop to 4.25 to 4.50 percent.
Growing narratives around de-dollarization, combined with policy uncertainty from the Trump administration’s trade and tariff policies, have eroded confidence in the dollar, accelerating its decline.
Read more: U.S. Dollar to Slide Further This Summer, Bank of America Warns