The strategist from State Street, Lee Ferridge, stated that the dollar could fall by up to 10% this year if financial conditions relax further. While he described two rate cuts as a reasonable base scenario, he warned that the risks lean towards more reductions.

Lower interest rates in the US tend to reduce the appeal of dollar-denominated assets, especially for foreign investors. As interest rate differentials narrow, foreign investors are more likely to increase currency hedging, which involves selling dollars to protect yields.