US Dollar May Lose Its Dominance as Sole Global Anchor; Indian Rupee Shows Strength

New Delhi – Global currency markets are witnessing a major shift as the US dollar comes under sustained pressure, driven by ongoing uncertainty over US interest rates and the potential reintroduction of trade tariffs, according to a report released Friday by Emkay Wealth Management.

In contrast, the Euro and British Pound have strengthened following swift and decisive interest rate cuts by the European Central Bank (ECB) and the Bank of England (BOE), the report said.

In Asia, the Indian Rupee has also shown short-term resilience, recovering from its recent high of ?87 to the US dollar. This rebound is being supported by better-than-expected trade data, though its longer-term stability depends on the resumption of foreign capital inflows, which are expected to pick up once US rates begin to ease.

As global markets closely watch the US Federal Reserve’s policy direction and broader geopolitical developments, the report highlights a growing consensus:

“The US dollar may no longer remain the sole anchor in the global currency landscape of 2025.”

Although the Federal Reserve is still proceeding with caution, expectations of interest rate cuts are gradually being factored into major currency valuations. Rising confidence in the Euro and Pound is being fueled by signs of economic recovery in the EU and a bold increase in defence spending, announced at the Munich Summit, where NATO countries agreed to raise spending from 2% to 6% of GDP.

The report also pointed out that without clearer guidance on US tariff policies and the inflation outlook, the Fed is unlikely to make any major monetary moves in the near term.

The real momentum in the global currency market, the report suggests, is shifting away from the US, powered by proactive policy measures and improving macroeconomic fundamentals in other regions.

The US dollar has already seen a multi-month decline, partly due to sustained high interest rates and growing concerns over reciprocal trade tariffs, especially since Donald Trump returned to office for a second term.

With inputs from IANS