US Dollar Index (DXY) Near 99 as Fed Rate Cut Bets Shake Global Markets and World Indices – Outlook for December 2025

Updated: December 7, 2025

The US Dollar Index (DXY) has entered the Fed’s December policy week sitting just under the psychological 100 mark, hovering around 99 after one of its weakest stretches of 2025. From 5–7 December, the dollar’s slide, driven by near-unanimous expectations of a Federal Reserve rate cut, has become a central story across global markets – from Wall Street to Asian equities, emerging‑market currencies and commodities.

Below is a detailed roundup of the latest news, forecasts and analysis on the US Dollar Index and its impact on world indices, based on coverage and research published between 5 and 7 December 2025.

1. Where the US Dollar Index Stands (5–7 December 2025)

By the end of trading on Friday, 5 December, the US Dollar Index was effectively flat on the day but anchored just below 99:

• Cash DXY traded around 98.99, with the index down about 0.5% for the week and still close to a five‑week low near 98.77. ^[1]
• December US Dollar Index futures settled around 98.97, after an intraday range of roughly 98.78–99.10. ^[2]
• Spot and futures pricing across several platforms show DXY effectively holding the high‑98s to 99 band into the weekend. ^[3]

Reuters’ late‑Friday global market wrap summed up the picture neatly: global shares gained while the dollar index eased about 0.10% to 98.98, leaving it on course for a second straight weekly loss. ^[4]

Another Reuters currency update described the dollar as “slipping” on Friday, with the index down 0.1% at 98.99, still “not far from Thursday’s five‑week low of 98.765,” and down about 0.5% on the week and roughly 9% year‑to‑date. ^[5]

Although 5–7 December includes a weekend (when cash trading is closed), futures quotes and weekend data snapshots show DXY parked in the same neighborhood – sub‑100, struggling to reclaim 99 decisively.

2. Why the Dollar Is Weak: The Fed Cut Countdown

The dominant driver of the recent dollar weakness is expectations of a Federal Reserve rate cut at the upcoming 9–10 December FOMC meeting.

Near‑certain cut priced in

Across multiple outlets, markets are described as almost fully priced for a 25‑basis‑point cut:

• Reuters reports traders are assigning a near 90% probability of a 25 bps cut on December 10, based on LSEG and CME FedWatch data. ^[6]
• ActionForex notes that rate‑cut expectations remained “relatively unchanged” after the latest PCE and University of Michigan sentiment data, with markets still seeing around an 87% chance of a 25 bps cut. ^[7]
• Coverage in the Financial Times similarly highlights that most surveyed economists expect the Fed to cut again, even as internal disagreement over the economic outlook intensifies. ^[8]

In other words, monetary policy expectations are firmly dovish – and the dollar is reflecting that.

A deeply divided Fed – and a political overlay

The upcoming meeting is also notable for what may be one of the most divided FOMC votes in years, with up to three or more potential dissents from policymakers who think the Fed has already eased enough. ^[9]

Markets are also digesting the possibility that White House economic adviser Kevin Hassett could replace Jerome Powell as Fed Chair when Powell’s term ends in May, a move many analysts see as increasing the risk of further rate cuts and therefore weighing on the dollar. ^[10]

Put together, the story into the 5–7 December window is:

The market is convinced the Fed will cut – and maybe keep cutting into 2026 – even as the Fed itself looks internally split. That combination has left the US Dollar Index under sustained pressure below 100.

3. World Indices React: Risk Assets Cheer a Softer Dollar

A softer dollar rarely moves alone. The 5 December rally in global stocks and the concurrent drop in DXY are two sides of the same trade.

US and global equities

Reuters’ global markets piece for Friday, 5 December shows risk assets in a broadly constructive mood: ^[11]

• Dow Jones Industrial Average: +0.22%
• S&P 500: +0.19%
• Nasdaq Composite: +0.31%
• Stoxx 600 (Europe): flat on the day but up ~0.4% for the week
• MSCI All‑Country World Index: edged higher, on track for a second straight weekly gain

The article explicitly links these gains to US inflation data (PCE) that came in line with expectations, reinforcing the Fed‑cut narrative and pushing the dollar index down to about 98.98, its second consecutive weekly decline. ^[12]

Other day‑of‑market rundowns (from platforms like Schwab and Investopedia) likewise show:

• US stocks up,
• volatility (VIX) subdued,
• and DXY unchanged to slightly weaker around 98.98–99.00 on 5 December. ^[13]

Asia and the yen: carry trade tremors

Asian markets saw more mixed price action, but the yen’s recovery and expectations of a Bank of Japan rate hike later in December added another twist. Reuters reports that:

• The yen has firmed as long‑dated Japanese bond yields climb to their highest levels since 2007.
• At the same time, the dollar index remains pinned near multi‑week lows as traders prepare for a Fed cut. ^[14]

That combination – Fed easing vs BOJ tightening – is encouraging some unwinding of popular yen‑funded carry trades in global equities and cryptocurrencies, potentially amplifying moves in world indices.

Emerging‑market FX: the rupee and beyond

The effect of a weaker dollar is more nuanced in emerging markets:

• In India, the rupee has weakened sharply past 90 per dollar, driven largely by local trade deficits and capital flows, even though the dollar index is relatively stable around 98.96–99.00. ^[15]
• Analysts there note that the combination of domestic fundamentals and limited central‑bank intervention can outweigh the broader DXY trend, underscoring that a softer dollar doesn’t automatically translate into stronger EM currencies.

Commodities: gold, silver and copper respond

Commodities have also been active beneficiaries of the weaker greenback:

• Benchmark copper futures hit an all‑time high as traders priced in easier US policy and ongoing supply concerns. ^[16]
• A separate FXStreet analysis highlights gold and silver rising amid weaker US yields, a softer dollar and continued focus on inflation and Fed policy. ^[17]
• TradingEconomics and other macro outlets note that the dollar index has held below 99, with the currency posting its worst weekly performance in about four months, contributing to strength across the metals complex. ^[18]

For world indices, this mix – stronger commodities, firmer EM assets and a weaker dollar – has helped sustain risk appetite, even as bond markets brace for central‑bank policy shifts.

4. Short‑Term Technical Picture: 98–99 Is the Battleground

Technical and tactical research published between 2–7 December paints the 98–99 zone as the key battlefield for DXY heading into the Fed meeting.

Key levels from institutional and independent research

1. Cambridge Currencies – “DXY: Bearish Below 100”
   • Current: ~99.00
   • Forecast range: 98.00–100.00
   • Bias: Bearish while below 100
   • A break below 98.00 is seen as opening the door to a deeper slide into the mid‑90s. ^[19]
2. ActionForex / MarketPulse – Support at 98.72–98.00
   • After the latest PCE and Michigan sentiment data, the US Dollar Index “slipped further” as cut expectations stayed near 87%.
   • Analysts highlight immediate support at 98.72, with the 100‑day moving average near 98.58 and the 98.00 handle as the next line in the sand. ^[20]
3. Daily Price Action – 4‑hour structure and 98.60 pivot
   • In a weekly forex forecast published on 6 December, Justin Bennett notes that DXY has rotated lower from the upper band of its distribution channel.
   • On the 4‑hour chart, he identifies 98.60 as “the only low that matters” for bullish market structure – the level that produced the last confirmed bullish break of structure.
   • Bulls, in his view, need to defend 98.60 and then reclaim 99.12; a sustained close below 98.60 would mark a clear bearish shift in character. ^[21]
4. Scotiabank via FXStreet – Break below 99 adds downside risk
   • Scotiabank strategists note that the Dollar Index has broken below 99, with soft labor data and doubts about Fed policy credibility weighing on the currency.
   • They argue that technical and seasonal forces now point toward further USD downside, even if interest‑rate futures have not fully priced in a deeper cutting cycle. ^[22]
5. LDN Global Markets – 99 as a support shelf
   • A separate technical blog describes the US Dollar Index as “trading around the 99 support area”, with a simple grid of support at 99 and 98 and resistance at 100 and 101 – effectively framing 99 as the first line of defense for dollar bulls. ^[23]

Put simply:

Short‑term technicals agree that 98–99 is the pivotal band. Hold it, and DXY can consolidate or even bounce. Lose it decisively, and the mid‑90s suddenly come into view.

5. Fundamental Forecasts: How Analysts See DXY into 2026

Beyond the next few days, several forecasting services and banks have updated their projections for the US Dollar Index as of early December.

Quantitative and model‑based forecasts

• Forecasts.org (macro/statistical model)
  • December 2025 average: 99.99
  • Q1 2026: rising toward the 101–103 range, peaking around 103.35 by March.
  • The site’s December 2 update implies a modest rebound in the dollar from current levels if the model is correct. ^[24]
• TradingEconomics macro models
  • TE’s latest projections (updated early December) suggest DXY will trade around 99.25 by the end of this quarter and drift down to roughly 97.1 over the next 12 months, consistent with a gradual trend‑lower. ^[25]
• Long‑term retail‑oriented forecasts (LongForecast)
  • LongForecast’s multi‑year outlook envisions DXY averaging the high‑90s in late 2025–26 before sliding into the low‑90s by 2027–28, with plenty of volatility along the way. ^[26]

Investment‑bank house view: Morgan Stanley

A November note from Morgan Stanley adds a more discretionary, macro‑driven angle:

• The bank expects the dollar index to fall to around 94 in the first half of 2026, reflecting the impact of US rate cuts and narrowing yield differentials,
• before rebounding to roughly 99 by the end of 2026 as global growth and policy dynamics re‑equilibrate. ^[27]

Narrative macro context: “A year of volatility”

A feature article on the US Dollar Index published on 7 December characterizes 2025 as “a year of volatility, shifting expectations, and a battle for economic confidence.” It argues that:

• The dollar entered 2025 strong amid high rates and lingering inflation fears.
• As the year unfolded, slowing consumer demand, tighter credit and political uncertainty increasingly weighed on the currency.
• The most likely outcome is that DXY ends 2025 slightly below its mid‑year range, but still above its long‑term average, consistent with a “transition” rather than a crisis. ^[28]

Taken together, the consensus is not for a dollar collapse, but for:

• Short‑term softness as the Fed begins cutting,
• Moderate volatility around key macro events, and
• A longer‑term drift lower or sideways as rate differentials narrow and global growth normalizes.

6. What a Sub‑100 Dollar Index Means for World Indices

With DXY comfortably under 100, several cross‑asset themes matter for investors in global indices.

6.1 US and global equity benchmarks

A weaker dollar tends to be supportive for global risk assets, and that logic is visible in the latest data:

• On 5 December, US large‑cap indices (Dow, S&P 500, Nasdaq) all logged gains and secured a second straight week of advances, even as DXY ended lower on the week. ^[29]
• European equities were mostly flat on the day but positive over the week, while MSCI’s global index also ticked higher. ^[30]

For equities, a softer dollar can:

• Boost earnings for US multinationals when foreign revenues are translated back into dollars.
• Ease financial conditions for non‑US borrowers with dollar‑denominated debt.
• Support higher risk‑asset valuations if lower yields and dovish Fed expectations persist.

That dynamic is echoed in broader 2025 commentary, which notes that late‑year dollar weakness has helped large global tech and industrial names upgrade their year‑end earnings guidance. ^[31]

6.2 Emerging markets and high‑beta assets

For EM and high‑beta plays:

• A softer DXY reduces pressure on EM sovereigns and corporates that borrow in dollars, often improving the outlook for local equities and bonds.
• However, idiosyncratic factors still dominate: India’s rupee, for example, continues to struggle above 90 per dollar despite a broadly weaker DXY, underscoring that domestic policy and flows can overpower the headline index. ^[32]

Crypto and other speculative risk assets have been choppy – with bitcoin sliding in recent sessions after strong gains – showing that dollar weakness alone doesn’t guarantee “everything rallies”. ^[33]

6.3 Commodities: metals, energy and precious metals

A sub‑100 dollar index is typically:

• Bullish for industrial metals,
• Supportive for gold and silver, and
• Moderately constructive for oil, all else equal.

Recent price action fits that template:

• Copper has surged to record highs, supported by both a weaker dollar and supply concerns. ^[34]
• Gold and silver have pushed higher in recent days on the combination of lower real yields and a softer greenback, even if day‑to‑day moves remain choppy. ^[35]
• Oil benchmarks (WTI and Brent) are trading modestly higher, helped by the weaker dollar and refined expectations for global demand rather than any single macro data point. ^[36]

For world indices heavy in energy, mining and materials, this commodity backdrop – combined with DXY’s slide – is an important tailwind.

7. Key Scenarios for the Week Ahead

With DXY sitting just under 99 and world indices leaning cautiously risk‑on, the Fed meeting is the obvious catalyst. Markets broadly see three main scenarios:

Scenario 1 – Base case: 25 bps cut, cautious but not panicky guidance

• Fed cuts by 25 bps, matching expectations.
• Projections show limited additional cuts in 2026, with several policymakers dissenting. ^[37]

Likely DXY / world‑indices reaction:

• DXY oscillates in the 98–100 range, respecting support at 98.6–98.7. ^[38]
• US and global equities consolidate recent gains rather than explode higher – much of the good news is already priced in. ^[39]

Scenario 2 – More dovish than expected: softer dot plot, “insurance” cuts for 2026

• Fed cuts and signals more cuts in 2026 than previously indicated. ^[40]
• Powell emphasizes downside risks to growth over inflation concerns.

Possible impact:

• DXY breaks below 98.60 and possibly tests the 98.00 handle, triggering a more pronounced bearish shift on the charts. ^[41]
• EM FX, commodities and high‑beta global indices extend their rallies as real yields fall and the hunt for carry resumes.

Scenario 3 – Hawkish surprise: no cut or very hawkish messaging

• Fed delays the cut or delivers guidance that implies fewer cuts in 2026 than markets currently expect. ^[42]

Potential outcome:

• DXY snaps back above 100, squeezing crowded short‑dollar positions and punishing consensus trades in EM, cyclicals and metals.
• World indices – particularly those in emerging markets and commodity‑heavy bourses – could see sharp short‑term pullbacks.

At the moment, the probabilities heavily favor Scenario 1 – but as several analysts note, when positioning is as one‑sided as it is now, even a small hawkish surprise can have outsized market impact. ^[43]

8. Practical Takeaways for Traders and Investors

For anyone watching the US Dollar Index and world indices into mid‑December, the 5–7 December news flow points to a few practical conclusions:

1. Watch the 98.60–99.00 band like a hawk.
   • This is the key short‑term pivot zone identified by multiple technical desks. A sustained break below 98.60 would confirm a more pronounced bearish phase for DXY; a hold and rebound above 99.1–100 would suggest consolidation instead. ^[44]
2. Global equities are leaning long “Fed cut + weak dollar.”
   • US, European and global indices have already rallied on the expectation of a cut, with DXY sliding to multi‑week lows. That improves the backdrop for multinationals and cyclical sectors but also raises the risk of short‑term disappointment if the Fed under‑delivers. ^[45]
3. Emerging markets and commodities are highly sensitive to any DXY break lower.
   • A move under 98 would likely turbocharge metals and select EM assets, while the reverse (a snap‑back above 100) could trigger sharp reversals. ^[46]
4. Medium‑term models still see DXY in the high‑90s to low‑100s.
   • Forecasts for 2026 from both quantitative sites and major banks cluster around the idea of a modestly weaker, but not collapsing, dollar, with values oscillating in a broad 94–104 corridor. ^[47]
5. For long‑horizon investors, the story is more about regime shift than day‑to‑day ticks.
   • 2025 increasingly looks like a transition year from peak‑tightening, strong‑dollar conditions to a more balanced, lower‑rate, slightly weaker‑dollar world – with significant implications for export‑heavy sectors, EM risk and commodity producers. ^[48]

9. Bottom Line

Between 5 and 7 December 2025, the US Dollar Index is quietly telling one of the most important macro stories in markets:

• It sits just under 99, down for a second consecutive week and hovering near multi‑week lows, as traders bet heavily on a Fed rate cut next week and a softer policy path into 2026. ^[49]
• World indices – from US benchmarks to global and sector‑specific gauges – are leaning into that weakness, pricing in a supportive backdrop for risk assets. ^[50]
• Technicals and fundamentals converge on the idea that 98–99 is the key line in the sand: hold it, and the dollar’s decline is a controlled glide‑path; lose it, and the mid‑90s become a live discussion. ^[51]

For now, the base case is a measured, policy‑driven weakening of the dollar rather than a free‑fall – but with positioning so one‑sided, any Fed surprise could make the next leg in DXY, and the reaction across world indices, fast and dramatic.

References

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