After a horrible year to date performance, the US dollar bounced off its low, with a weekly return of +.83% and a monthly return of +2.25% as of October 14, 2025
Is this the inflection point, the start of a rally? This is an important question for crypto investors because USDC and USDT dominate the stablecoin market. Whatever happens in US dollar stable will reflect on crypto overall. A strong USDC and USDT are good for crypto overall. Major drawdowns are not good.
To answer the question of whether this could be an inflection point or not, we have to determine whether the positive movement of the US dollar this past week was due to US economic and financial optimism, or to problems in major currencies, like the Euro, the Yen, and UK pound. If it is due to problems in the Euro, Yen, or UK pound we have ascertain if the problems are short-term or structural.
If the move upwards in the US dollar is due to near-term negatives of other currencies, US dollar strength may not hold once the concerns have been resolved. To note, it is clear US dollar strength was not driven by improving economic fundamentals, or the rectification of structural or systemic problems such as the government shutdown and policy uncertainty.
When the Euro, Yen, and UK Pound are looked at, the common denominator explaining weakness seems to be political uncertainty. If a significant part of currency weakness is attributed to political uncertainty, negative pressure may not last long. Political problems are usually transitory in nature, not systemic of structural. Political uncertainty is like a cold or flu. With time, it passes and is rarely a chronic disease.
Looking at the political situations in Europe, Japan, and UK, it is not surprising they weakened against the dollar last week. The Yen was hit by political uncertainty when one of the coalition parties in the government said they were leaving the coalition. The Euro is being pressured by political turmoil in France, where President Macron has not been able to form a government. Given France’s economic position in the Eurozone, political concerns will weigh on the Euro. The UK pound was pressured as the government is pushing for higher taxes to remedy fiscal problems, and higher taxes do not shine well on governments in power.
So, nothing really changed with the weak dollar fundamentals, but it went up in value. Given the structural problems of the US dollar are still there, it may have seen most of its big move. The problems in Japan, Europe, and the UK look to be more transitory in nature, political, problems that are easier to clear than structural ones.
So, we can conclude that recent dollar strength is not attributed to a “strong dollar”, rather uncertainty in the other major currencies.
If the structural concerns of the US dollar exist, it is a good idea to increase exposure to an array of foreign currencies like the Euro, the Yen, and the UK pound. Use the dollar strength to take some profit in USDC or USDT and buy some stablecoins or bonds in Europe, Japan, and the UK.
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