Jane Foley, head of FX strategy at Rabobank, anticipates a "weakening trajectory" for the US dollar through 2026, forecasting "choppy trading" as geopolitical risks continue to impact currencies. This outlook follows the ouster of Venezuela’s President Nicolas Maduro, which Foley cited as contributing to these global uncertainties. The dollar’s recent performance also includes a drop to its lowest level since May on September 3, 2026, after comments from Federal Reserve Governor Christopher Waller on inflation progress, which saw the Bloomberg Dollar Spot Index fall 0.6%, its worst day in over two weeks.
Foley previously noted a "needed" washout in the dollar's positioning by July 31, 2025, suggesting that the currency had lagged behind the broader rotation trade observed in equities. This indicates that many investors were over-exposed to the dollar, and a correction was underway as they adjusted their portfolios. The current environment is characterized by a high global exposure to the dollar, which some analysts believe could exacerbate a sell-off if sentiment turns.
Indeed, global financial institutions, including pension funds and insurers in markets like Japan, Canada, and Taiwan, have hedged only 41% of their foreign-currency exposure as of June 30, 2026. This is the lowest level on record and leaves them vulnerable to further dollar depreciation, as they have limited protection against a weaker greenback. This high unhedged dollar exposure could fuel a steeper decline if investors begin to deleverage or seek alternatives, posing a significant risk to the currency's stability.
