US dollar may no longer be sole anchor in global currency, rupee remains strong

New Delhi, July 25 Global currency markets are undergoing a significant transition as the US dollar faces consistent downward pressure, driven by lingering uncertainties around US interest rates and the possibility of new trade tariffs, a report said on Friday.

Meanwhile, the Euro and British Pound have gained ground, following timely and aggressive rate cuts by the European Central Bank (ECB) and the Bank of England (BOE), according to Emkay Wealth Management's latest report.

In the Asian context, the Indian Rupee has shown short-term strength, recovering from a recent high of Rs 87.

According to the report, this rebound in Indian currency is partly supported by improved trade data; its durability hinges on the return of foreign capital, expected once US interest rates begin to ease.

As the year unfolds, global markets will continue to track the Fed’s signals and geopolitical shifts.

"But one thing is becoming increasingly apparent: the Dollar may no longer be the sole anchor in the global currency narrative of 2025," the report stated.

While the Federal Reserve remains cautious, expectations of rate cuts are gradually being reflected across major currency pairs.

Market confidence in these currencies' continued strength has increased as a result of these actions, as well as indications of the EU economy's recovery and a daring rise in defence spending, which was announced at the Munich Summit and increased from 2 per cent to 6 per cent of GDP.

Until there is greater clarity on US tariff policy and inflation outlook, the Fed is unlikely to commit to any major rate moves, the report noted.

The real momentum in currencies is shifting outside the US, driven by proactive policy responses and improving macroeconomic fundamentals.

The American currency has been falling for a few months as U.S. interest rates have risen, and the new reciprocal tariff concerns since Donald Trump took office for the second time.

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