It’s not been a very good year for the U.S. dollar. The greenback is down a little over 9% since January 2025, against a basket of other major world currencies. It slid pretty sharply in the first half of the year, as President Trump threatened steep tariffs on allies and other trading partners and the Federal Reserve cut interest rates to maintain the momentum of U.S. economic growth. 

During the summer and early fall, the dollar settled into a relatively stable pattern — not moving up or down very much. But since mid-November, it’s been edging lower again. And there are indications it could keep sliding in 2026. 

Which — as is always is the case with currency fluctuations, and with most other economic dynamics as well, come to think of it — would benefit some parts of the U.S. economy, and harm others.

Global investors plow more capital into a country, driving up its currency, when they think its economy is going to outperform others, or its central bank will offer higher interest rates, juicing their returns. 

That’s what happened in late 2024, as the dollar rose on strong growth expectations. Then President Trump’s tariffs were announced, investors got worried, and the dollar fell. And next year?

“Logically, the dollar ought to weaken, because it looks like there will be economic as well as political pressures in the U.S. to cut interest rates, while at the same time other major central banks could be moving in the other direction,” said Cornell economist Eswar Prasad. 

Also, he said, the U.S economy looks more dicey than major European and Asian economies heading into 2026 with the labor market softening.

There’s also still plenty of policy uncertainty in the U.S., including questions about the Federal Reserve’s independence and political pressure for lower interest rates. That’s undermining global investor confidence, said Gary Schlossberg at the Wells Fargo Investment Institute. Still, Schlossberg’s prediction for the dollar next year runs counter to Prasad’s. 

“We still think the dollar will be steady to slightly firmer,” he said.

Schlossberg thinks even as the U.S. economy weakens, others are in worse shape: 

“China, really dependent on exports to drive growth, that’s masking structural issues. In Europe, there are some fiscal uncertainties, political uncertainties,” he said.

Still, the prevailing consensus among economists does seem to be that the dollar will continue to weaken. Which will likely be good for U.S. exporters, making their products more competitive abroad. But it’ll contribute to inflation, since so much of what we consume, from food to clothing, is imported.