Plexus: The US dollar may further weaken, maintaining a higher allocation to non-US investment-grade bonds and emerging market currency bonds
Tim Murray, a strategist at PIMCO's multi-asset department, pointed out that since the beginning of 2025, the US dollar has significantly depreciated against other major currencies, and this trend is expected to continue. Key factors include divergence in monetary policy, questioning of the Federal Reserve's independence, fiscal deficits, and declining demand from foreign investors. PIMCO advises investors to adjust their portfolios by increasing allocations to non-US investment-grade bonds and emerging market currency bonds. The Federal Reserve's interest rate cuts and policy differences with other central banks may also impact the demand for the US dollar
According to the Zhitong Finance APP, Tim Murray, a capital markets strategist in the diversified assets department of PruLife, pointed out that the US dollar has significantly declined against other major currencies since the beginning of 2025, and several factors indicate that this trend may continue. These factors include monetary policy divergence, questioning of the Federal Reserve's independence, a massive fiscal deficit, and declining demand from foreign investors. Given the possibility of further weakening of the dollar, investors should consider adjusting their portfolios accordingly. Therefore, PruLife's Asset Allocation Committee currently holds a higher allocation to non-US investment-grade bonds and emerging market local currency bonds.
PruLife mentioned that the Federal Reserve has recently begun to cut interest rates, while other major central banks have stopped or are nearing the end of their rate-cutting cycles. This means that the interest rate gap between countries is narrowing, which often reduces market demand for the dollar.
US President Trump has taken a tough stance, trying to force the Federal Reserve to cut interest rates while inflation remains high. If investors believe that the Federal Reserve cannot effectively control inflation due to political pressure, the dollar may be impacted.
Additionally, the US government's spending continues to exceed tax revenue, and if a sovereign debt crisis occurs, it could lead to a significant weakening of the dollar.
PruLife stated that global investors have been keen to hold the dollar, given the strong performance of US companies and the dollar's status as the world's primary reserve currency. However, the Trump administration's stance on trade and foreign policy has weakened foreign investors' willingness to hold US assets (especially US Treasury bonds)
