Bank of America has warned that the US dollar could depreciate this year.
Analysts at Bank of America (BofA) said that expected interest rate cuts by the US Federal Reserve would reduce the cost of hedging against dollar weakness, potentially leading the dollar to lose value against most currencies this year.
According to the analysts, Fed rate cuts would further narrow US interest rate differentials and lower the cost of hedging US assets against a weaker dollar. They noted that “relatively” high hedging costs had been one of the main obstacles to dollar hedging activity in 2025.
The analysts also emphasized that efforts by the Trump administration to reduce housing-related costs could encourage further rate cuts, while risks to the Federal Reserve’s independence could pose an additional challenge for the dollar.
