The dollar index (DXY), which measures the U.S. dollar’s strength against a basket of major global currencies, has dropped below 98 for the first time since early 2022. This decline signals a significant shift in global currency markets and creates a favorable environment for risk assets, particularly cryptocurrencies such as Bitcoin. In recent years, a DXY reading above 100 has often reflected dollar dominance and a risk-off sentiment, negatively impacting equities and digital assets. Conversely, a weaker dollar eases financial conditions, increases global liquidity, and tends to benefit speculative assets. Contributing factors include U.S. headline inflation coming in at 2.4% year-over-year, slightly below the consensus estimate of 2.5%, strengthening market expectations for a dovish monetary policy shift. According to the CME FedWatch Tool, markets now anticipate a 99.8% probability of a rate cut at the June Federal Reserve meeting, with the target range expected to drop to 4.25 to 4.50%. Narratives around de-dollarization and policy uncertainty have also contributed to the dollar’s decline.
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