TD Securities says the dollar’s 2025 slide reflects a correction from strength, not a rush to exit, with only modest downside expected in 2026.
Summary:
-
Dollar fell 8% trade-weighted in 2025, ~10% versus majors
-
Pullback reverses gains since late 2023
-
USD remains near long-term averages and multi-decade highs
-
No sign of accelerated flight from dollar systems
-
TD sees further ~3% downside in 2026
TD Securities says concerns that global investors are rapidly abandoning the U.S. dollar are overstated, even after a difficult year for the greenback. While the dollar weakened meaningfully in 2025, the move largely represents a correction from elevated levels rather than a structural break.
On a broad trade-weighted basis, the U.S. dollar fell around 8% last year, with a steeper decline of roughly 10% against major currencies. That pullback ended a steady appreciation trend that had been in place since late 2023. Even so, TD notes the depreciation has only taken the dollar back toward its 2024 levels and close to its long-term average against many peers.
From a longer-term perspective, the greenback remains historically strong. On trade-weighted measures, the dollar is still hovering near its three-decade highs, underscoring that recent weakness does not equate to a collapse in confidence or status.
Looking ahead to 2026, TD Securities expects further, but modest, downside of around 3%. The firm sees little evidence that diversification away from dollar-centric financial systems has accelerated meaningfully. Instead, de-dollarisation pressures appear gradual and evolutionary rather than disruptive.
TD argues that while structural diversification trends remain intact, they are unfolding slowly and are unlikely to generate sharp or disorderly moves in the currency. As a result, the dollar’s outlook is best characterised as one of mild depreciation from a position of strength, rather than a crisis of demand or credibility
