December Poised to Be the Dollar’s Worst Month… A “Triple Blow” Threatens the U.S. Currency Heading Into Late 2025

NYN | Reports and Analyses 

The U.S. dollar is preparing to enter one of its most turbulent phases in a decade, amid warnings from global banks predicting that the American currency will face simultaneous pressures toward the end of 2025.

According to the Baqsh Economic Observatory, the convergence of three major developments—a decisive court ruling, potential changes in Federal Reserve leadership, and a shift in Japan’s monetary policy—could amount to a “triple blow” that places the dollar in an unprecedented test in December.

Supreme Court: One Ruling Could Change Trade and the Dollar’s Trajectory

Markets are awaiting a Supreme Court decision on the legality of the tariffs Donald Trump relied on to reshape U.S. trade relations during his presidency.

Major banks, including Standard Bank, see the cancellation of these tariffs as a “first blow” to the dollar, as they formed one of the pillars supporting capital inflows over the past two years.

According to Baqsh’s analysis, any ruling striking down the tariffs would mean a reordering of power balances in global supply chains—likely weakening the dollar quickly, especially since investors have already priced in the benefits of protectionism throughout the year.

Bloomberg data suggests the case is “systemic” in nature, with the potential to restructure global trade routes rather than merely eliminate revenue from duties.

Possible Appointment of Kevin Hassett as Fed Chair: Political Pressure on Monetary Policy

The prospect of Kevin Hassett being selected to lead the Federal Reserve represents the dollar’s potential “second blow.”

Hassett is among the strongest advocates for rapid interest-rate cuts, which would mark a fundamental shift from the Fed’s years of tight policy.

Financial analysis firms—including Russell Investments—say that the mere circulation of his name within decision-making circles is enough to alter rate expectations for 2026.

If his nomination is confirmed, Baqsh expects a large unwinding of long-dollar positions and increased bets on the yen, euro, and Swiss franc.

Investors fear the leadership change could disrupt the central bank’s independence, especially given Trump’s well-known history of publicly pressuring for rate cuts.

Analysts note that markets typically react to “political signals” before official decisions are issued—making the dollar vulnerable to preemptive shocks.

Japan Moves Toward a Rate Hike… Yen Poised for a 10%+ Surge

In Asia, the Bank of Japan is nearing a decision that could reshape currency markets, with strong expectations of a rate increase for the first time in months. Analysts at Deutsche Bank and Standard Bank believe the yen could jump more than 10% if a rate hike is announced—delivering the dollar’s “third blow.”

Investors are pricing in a high likelihood of a 25-basis-point increase, which has already fueled early yen-strengthening moves in recent weeks.

Baqsh’s analysis notes that Japan’s policy shift is not a mere technical adjustment but a strategic repositioning of the yen as a major safe-haven currency during a sensitive time of year—and amid December’s seasonally thin liquidity.

December Historically the Dollar’s Weakest Month Becomes a Harsh Testing Ground

Deutsche Bank data shows that December has been the worst-performing month for the dollar over the past ten years.

In 2025, the landscape appears even more complicated, as year-end position unwinding overlaps with unprecedented political and monetary developments.

The bank expects the dollar to fall about 2% from current levels—enough to bring it back to its third-quarter range.

The Bloomberg Dollar Spot Index has also come under increasing pressure despite modest gains this quarter, amid investor conviction that these gains are fragile and likely to reverse.

Baqsh’s analysis warns that a convergence of the Supreme Court ruling, the Hassett nomination, and a Japanese rate hike could trigger a wave of volatility that extends beyond December into 2026.

An Alarming Outlook for the Dollar: Three Interlinked Paths Could Redraw the Currency Map

The dollar is now facing a complex web of pressures: a judicial threat to protectionist policies that have supported it, the possibility of a major shift in Fed direction, and an expected surge from one of its historic rivals—the Japanese yen.

According to the Baqsh Economic Observatory, the overlap of these factors may lead not only to the dollar’s usual seasonal dip in December but also to a prolonged phase of weakness extending into 2026—especially amid a highly unstable global political and economic environment.

With the year’s end approaching, the Observatory poses a single overarching question for global markets:

Will the dollar face a temporary setback… or is the world preparing for a new cycle of weakness that could reshape currency markets for years?

Source: Boqsh Economic Observatory