The US currency risks weakening by about 10% over the course of the year if the Federal Reserve pursues a more aggressive reduction in interest rates than the markets are currently anticipating. This opinion was expressed by State Street strategist Lee Ferridge, according to Bloomberg.

According to him, investors expect the Fed to resume easing policy as early as this summer and at least two rate cuts of 25 basis points by the end of the year. However, the expert does not rule out a third step towards a reduction in 2026. He links this scenario to possible increased political pressure on the future head of the regulator.

An additional factor putting pressure on the dollar could be cheaper currency hedging for foreign investors with lower rates in the US. According to the analyst, an increase in the volume of such transactions could reinforce the downward trend for the US currency.

In the short term, the dollar may partially recover by 2-3% if strong macro statistics are published, which will reduce expectations of an imminent easing of Fed policy. However, in the longer term, Ferridge believes that the risks of a shift in monetary policy towards a more accommodative stance remain significant, which could lead to a further narrowing of the US interest rate differential with other countries and a weakening of the dollar.