Long-running US dollar outperformance has reversed in 2025. Looking ahead, we see the potential for sustained further dollar depreciation. If investors wish to diversify away from exposure to the dollar, we believe they should consider raising their allocations to Emerging Market (EM) equities and debt, and to European fixed income assets.

Key takeaways

• In the 15 years from the end of 2009 through to the end of 2024, the US Dollar Index rose nearly 40%. That dollar appreciation turbocharged returns for overseas investors on their exposure to US assets, across both equities and fixed income.

• Yet counter to widespread expectations of continued dollar strength under a second Trump US presidency, the US Dollar index has dropped around -10% so far this year. Looking forward, we see potential for sustained further dollar depreciation.

• For those investors wishing to diversify away from exposure to the dollar, we believe three core asset groups are set to benefit from both improved fundamentals and asset flows: EM equities, EM debt, and European fixed income.

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