Dollar risks are mounting. Here’s what could weaken the greenback

Growing fiscal risks, softer economic data and uncertainty over Federal Reserve policy could intensify pressure on the U.S. dollar, despite recent strength, according to currency strategists.Higher U.S. bond yields have helped support the dollar in 2026 by attracting more capital inflows into dollar assets.The U.S. Dollar Index tracks the performance of the greenback against six major global currencies, including the euro, the pound, the Swiss franc, the Japanese yen and the Canadian dollar. The benchmark is up 1.15% year-to-date, notching a 52-week high of 101.80 on June 24. The index registered at 99.4 as of 5:32 a.m. ET on Wednesday. Charu Chanana, chief investment strategist at Saxo, said higher Treasury yields do not necessarily support the dollar if investors believe the increase reflects fiscal risk, heavier government borrowing or persistent inflation, rather than stronger U.S. growth or tighter Fed policy, said.The historic relationship between Treasury yields and dollar strength "still matters," Chanana added, but "investors should increasingly ask why U.S. yields are rising.""A higher yield generated by stronger economic fundamentals is not necessarily equivalent to a hi...