Dollar may fall 10% this year if Fed cuts more than expected, says strategist

SelfRugger · 2026-02-14T07:03:02+00:00

The dollar may decline by 10% this year if the Federal Reserve cuts interest rates more than anticipated, according to strategist Lee Ferridge. He believes potential pressure from President Trump on the new Fed chair could lead to deeper cuts, affecting currency hedging.

SelfRugger

2026-02-14 07:03:02

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Dollar may fall 10% this year if Fed cuts more than expected, says strategist

Vlad Schepkov

Wed, February 11, 2026 at 12:08 AM GMT+9 2 min read

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Investing.com – The dollar could decline by 10% this year due to the possibility that the Federal Reserve will cut interest rates more aggressively than markets currently expect once a new Fed chair takes office, according to State Street Corp. strategist Lee Ferridge.

While traders currently anticipate the Fed will begin lowering interest rates around June with at least two quarter-point reductions by year-end, Ferridge believes there is potential for a third cut in 2026. This view is partly based on the expectation that current Chair Jerome Powell’s successor will face pressure from President Donald Trump to reduce borrowing costs.

“Three is possible,” Ferridge said during an interview at the TradeTech FX conference in Miami. “Two is a reasonable base case, but we have to accept we are going into a more uncertain period of Fed policy.”

Ferridge explained that deeper Fed rate cuts would make it less expensive for foreign investors to hedge currency risk on their U.S. investments. As investors increase this hedging activity, it could put downward pressure on the dollar.

The strategist noted that concerns about economic impacts from trade friction and the U.S. fiscal outlook have already weakened the dollar, along with Trump’s pressure on the Fed. Trump has nominated former Fed Governor Kevin Warsh to succeed Powell, whose term ends in May.

In the near term, Ferridge predicts the dollar may rebound 2%-3% as strong U.S. economic data reduces expectations for Fed cuts. However, he believes dollar selling is “just waiting for once Kevin Warsh takes over the Fed and starts cutting rates probably more persistently and narrowing that rate spread with the rest of the world.”

According to State Street data, the current hedge ratio of about 58% is significantly lower than the level of above 78% before the Fed began hiking rates in 2022.

Dollar may fall 10% this year if Fed cuts more than expected, says strategist

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