Dollar Not Expected to Experience Free-Fall: CIBC Economic Outlook

U.S. dollar index (DXY) retreated about 9% over the past year despite a recent partial rebound, yet CIBC economist Avery Shenfeld says there is no justification for concern over a free-fall. He notes that heightened searches for “dollar debasement” and discussions remain elevated, but no significant flight from Treasuries or a cascade of sell-offs is evident. The traditional inverse relationship between gold and the dollar has weakened; gold advanced strongly in 2024 alongside the dollar, indicating gold cannot reliably gauge U.S. currency strength. “There is no evidence of a disastrous market outcome from dollar depreciation,” Shenfeld said. Federal funds rate policy is likely to prioritize economic fundamentals over political preferences for a weaker dollar, with the Fed considering further easing only after clearer economic softening. In conclusion, CIBC expects the dollar to回归 its longer-term average, with no immediate basis for severe economic or financial consequences.