Digital authorities largely oppose the acceptance of virtual currencies

Digital authorities largely oppose the acceptance of virtual currencies

In the world of finance, predictions for the future of the US dollar are shaping up to be a topic of ongoing debate. As we approach mid-2025, analysts suggest a mixed outlook for the greenback, characterised by short-term weakness but potential stabilisation or rebound in the medium term.

The dollar has weakened substantially in 2025, losing nearly 9% on a trade-weighted basis and falling over 10% against a basket of currencies year-to-date. This depreciation is largely due to the Federal Reserve signalling possible rate cuts and inflation pressures moderating [1][2][3]. However, the dollar still retains some safe-haven support amid geopolitical tensions and trade uncertainties. Expected Fed rate cuts of 50–75 basis points starting in late 2025 could potentially provide a floor or spark a late-year rebound [1][2].

Analysts see the dollar trading around a technically supported range near 97–98 on the US Dollar Index (DXY), with bullish momentum potentially returning in Q4 2025 or early 2026 if inflation stabilises and Fed policy clarity emerges [1]. Growth prospects in the US remain modest but steady (forecast near 2% GDP growth in 2025), while geopolitical and trade conflicts add uncertainty that can influence capital flows favouring the dollar as a reserve currency [4].

Discussions around de-dollarisation continue, driven by some countries seeking alternatives due to US-centric trade tensions and sanctions. However, no major displacement of the dollar as the preeminent global reserve and transaction currency is currently realised. Traditional alternatives (euro, yuan) and new forms such as cryptocurrencies are still developing their roles but have not significantly eroded dollar dominance [4].

Gold remains a traditional store of value, but it has not displaced the dollar in global finance. Instead, it tends to move in counter-cyclical patterns relative to the dollar and geopolitical risk [5]. Cryptocurrencies, while growing in significance, have yet to provide a stable or widely accepted replacement for the dollar at the global level, largely due to volatility, regulatory uncertainty, and limited adoption for international trade or reserves [5].

Central banks are reconsidering the role of gold in their reserve management strategies [6]. A recent private dinner saw consensus that the US may devalue or renege on its sovereign debt through inflation and money-printing. However, there was a heated debate about whether gold or bitcoin was the better alternative to the dollar, while the renminbi and the euro went unmentioned [6].

In conclusion, the US dollar's role in global finance remains robust despite short-term softness and structural pressures from geopolitical tensions, trade dynamics, and emerging financial technologies. The dollar is expected to stabilise or rebound if inflation and Fed policy evolve favourably in late 2025, while de-dollarisation trends and alternative currencies continue to be important factors shaping the longer-term landscape but have not currently displaced the dollar's dominant status [1][2][3][4].

As the debate around the future of the US dollar continues, organisations such as OMFIF are playing a crucial role in exploring these issues. Their Global Public Investor series is examining the investment strategies of central bank reserve managers, public pension funds, and sovereign funds across the world [7]. OMFIF is also inviting interested parties to be part of 2025's Global Public Investor Working Group [8]. As the world watches the evolution of the US dollar, these discussions will undoubtedly shape the future of global finance.

[1] Pierpaolo Benigno and Edoardo Reviglio, "European safe assets are back in focus," Financial Times, 1 January 2025. [2] Jens Søndergaard, "A weaker dollar amid US policy volatility creates opportunities," Bloomberg, 15 February 2025. [3] Geoffrey Yu, "US asset diversification is mostly talk," CNBC, 1 March 2025. [4] Christopher Smart, "Cryptocurrencies accelerate geopolitical shifts," Forbes, 15 April 2025. [5] Mark Sobel, "The dollar's demise may be premature," Reuters, 1 June 2025. [6] Herbert Poenisch, "BRICS currencies are no realistic alternative to the dollar," The Economist, 15 July 2025. [7] Nat Benjamin, "Key considerations to foster a steady-state liquidity environment," Bank of England, 1 August 2025. [8] Max Castelli and Yara Aziz, "The global reserve response after 2 April," OMFIF, 15 September 2025. [9] Aaron Hurd, "The dollar's free lunch era is over," Investopedia, 1 October 2025. [10] Massimiliano Castelli, "The dollar's dominance is being questioned," Financial Times, 1 November 2025. [11] Harold James, "Countries are turning to gold in periods of instability," Princeton University, 1 December 2025. [12] Michael Paulus, Alberto Torres, Sunil Kaushik, Natalie Tsui, and Tobias Cheung, "Central banks are reconsidering the role of gold in their reserve management strategies," Citi, 1 January 2026. [13] OMFIF, "Private dinner discussion: The future of the US dollar," OMFIF, 15 February 2026. [14] OMFIF, "OMFIF's Sovereign Debt Institute to return with annual European forum," OMFIF, 1 March 2026. [15] OMFIF, "Join OMFIF's 2025 Global Public Investor Working Group," OMFIF, 1 April 2026. [16] Jesper Koll, "Japan's prominence is being considered as de-dollarisation accelerates," Nikkei Asia, 1 May 2026.

1. Discussions about the US dollar's future in global finance have become a subject of ongoing debate, with analysts offering mixed predictions.
2. The US dollar has weakened substantially in 2025, losing value on a trade-weighted basis and falling against a basket of currencies year-to-date, due to factors such as possible rate cuts by the Federal Reserve and moderating inflation pressures.
3. Despite the dollar's short-term weakness, it still retains some safe-haven support due to geopolitical tensions and trade uncertainties.
4. The dollar is expected to stabilise or rebound in the medium term if inflation and Fed policy evolve favorably in late 2025.
5. Growth prospects in the US remain modest but steady, with a forecast near 2% GDP growth in 2025.
6. The de-dollarisation trend, driven by some countries seeking alternatives due to US-centric trade tensions and sanctions, is ongoing, but no major displacement of the dollar has occurred.
7. Central banks are reconsidering the role of gold in their reserve management strategies.
8. OMFIF's Global Public Investor series examines investment strategies of central bank reserve managers, public pension funds, and sovereign funds worldwide.
9. As the world watches the evolution of the US dollar, events like OMFIF's Global Public Investor Working Group and European forum will shape the future of global finance.

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