Dollar Weakness Tracks Fed Cuts — Not a Loss of Reserve Status

BlackRock Investment Institute’s Weekly Commentary (13 Oct 2025) examines the drivers behind the U.S. dollar’s recent decline and its market implications.

• The dollar’s slide is in line with historical patterns, driven mainly by expected Fed rate cuts and a rise in term premium due to mounting global debt concerns—not capital flight from U.S. assets.

• A softer dollar is supporting emerging market returns, especially in local currency debt (e.g. Brazil 10-year bonds ~14% yield) and selective EM equities like South Korea and South Africa.

• With long-duration bonds losing ballast power, BlackRock highlights gold and bitcoin as alternative risk diversifiers, while maintaining an overweight in U.S. equities tied to AI growth.

Will shifting drivers of currency markets open broader opportunities beyond the U.S.? Explore the full commentary for tactical positioning insights.