How to Position Your Investment Portfolio When the US Dollar is Weak

September 16, 2025

After years of dollar strength, the greenback has stumbled in 2025. A weaker dollar can create both challenges and opportunities. Here’s how investors can adapt their portfolios for this new environment.

Few currencies carry as much weight as the US dollar. As the world’s reserve currency, it underpins international trade, global finance, and central bank reserves. For investors, movements in the dollar ripple through equity markets, bond returns, commodity prices, and even real estate valuations.

After more than a decade of strength, the dollar is now weakening. The US Dollar Index has dropped nearly 10% so far in 2025, marking its worst first-half performance in over 50 years. This decline comes after an extended period where US assets dominated, attracting global capital and boosting the greenback.

Source: Trading Economics, 15 Sep 2025

The shift has important consequences. A weaker dollar tends to support global equities, commodities, and export-driven economies—while posing risks for US-centric portfolios. Investors who adapt early may find new sources of return.

Drivers of a Weaker Dollar
Implications of a Weak Dollar
Investment Opportunities in a Weak Dollar Environment
Portfolio Positioning Strategies
How Syfe Portfolios Can Help
Conclusion

Drivers of a Weaker Dollar

Several forces are converging to pressure the dollar lower:

Overvaluation: Even after recent declines, the dollar remains expensive on a trade-weighted basis compared to long-term averages.
Reserve currency concerns: The US retains its dominant role, but unpredictable policymaking and fiscal strains have slowly eroded investor confidence.
Balance of payments: Persistent current account deficits mean the US must attract massive inflows of foreign capital just to keep the dollar stable. This reliance is becoming harder to sustain.
Interest rate cuts and narrowing differentials: The Federal Reserve is expected to cut rates multiple times in 2025, while other central banks such as the European Central Bank and Bank of Japan keep policy tighter. This narrows interest rate differentials between the US and other economies, reducing the dollar’s yield advantage and weakening demand for the greenback.

Together, these factors point to a structural weakening of the dollar over the coming years, not just a short-term correction.

Implications of a Weak Dollar

For investors, a declining dollar is typically:

Positive for international assets: Non-US equities and bonds become more attractive as local currencies strengthen.
Supportive of commodities and gold: Since these are priced in dollars, their values rise when the dollar falls.
Mixed for US assets: Multinationals with overseas revenues benefit, but investors holding unhedged dollar-denominated bonds may see weaker real returns.

Beyond the numbers, there’s also the emotional side of FX fluctuations. Seeing returns diminished when measured in local currency can be unsettling. Long-term investors should avoid overreacting to short-term currency moves, focusing instead on structural diversification.

Investment Opportunities in a Weak Dollar Environment

US Multinationals with International Revenues

Companies that earn a large share of their sales abroad benefit as overseas revenues translate into more dollars. Tech giants, pharmaceutical firms, and consumer goods companies fall into this camp.

International Equities (Developed Markets)

European, Japanese, and Korean exporters become more competitive when the dollar weakens. Diversifying into developed markets helps investors capture this tailwind while reducing US concentration risk.

Emerging Markets

Emerging economies often carry dollar-denominated debt, so a weaker dollar eases repayment burdens while attracting capital inflows. China, India, and Brazil stand out as beneficiaries.

Commodities and Gold

Most commodities are priced in dollars. So when the dollar falls, commodities become cheaper and demand for them rises. Increased demand pushes commodity prices higher. Crude oil and industrial metals often move inversely to the dollar.

Source: Trading Economics, 15 Sep 2025

Gold, meanwhile, serves as both a safe haven and an inflation hedge, historically performing well in periods of dollar weakness.

Currency Diversification

Investors can reduce dollar dependence by holding assets denominated in other major currencies, such as the euro, yen, or Swiss franc. Commodity-linked currencies like the Australian and Canadian dollars also tend to strengthen when the US dollar declines.

Portfolio Positioning Strategies

In a weak USD environment, here’s how can investors position their portfolios to capture upsides and mitigate risks:

Reduce concentration in US assets: The US remains important, but portfolios overly tilted toward US equities may miss opportunities abroad.
Diversify equity exposure internationally: A weaker dollar tends to favor international stocks, especially in export-driven economies such as Europe, Japan, and South Korea, as well as higher-growth emerging markets like India, China, and Brazil. These regions can benefit from stronger currencies, improved competitiveness, and easier debt servicing. Shifting part of your equity allocation abroad helps capture these trends.
Stay invested in equities and gold: Both asset classes generally outperform in weak dollar regimes.
Manage FX exposure strategically: Avoid expensive, short-term hedging. Instead, embrace global diversification as a natural currency hedge.
Diversify across asset classes: Combining equities, real estate, commodities, and bonds helps balance risks.

Position For a USD Shift With Syfe

Navigating a weak dollar environment requires a foundation of global diversification, which Syfe portfolios are designed to provide.

Core portfolios are globally diversified, multi-asset strategies that offer exposure not just to US equities but also to international developed markets, emerging markets, and alternative assets. By reducing reliance on the US alone, Core portfolios are positioned to capture growth in regions that stand to benefit most from a weaker dollar.

Real estate investment trusts (REITs) can benefit from falling interest rates—a common policy backdrop when the dollar weakens. REIT+ provides investors access to the top 20 Singapore REITs, offering both yield and diversification away from US-centric holdings.

Together, these portfolios allow investors to balance risks and opportunities as currency trends evolve.

Stay Balanced in a Shifting Currency Environment

The US dollar’s decline marks a turning point after years of strength. For investors, it brings both challenges and opportunities in global equities, commodities, and real estate.

The key takeaway is not to overhaul your portfolio but to make measured adjustments. Building exposure to non-US assets, maintaining a stake in gold and commodities, and diversifying currencies can help safeguard returns.

In an uncertain world, broad-based diversification remains the most reliable compass. Portfolios like Core and REIT+ provide ready-made solutions to adapt and thrive in a weaker dollar environment.

Explore Core portfolios