BCA Research’s Bearish U.S. Dollar Call: The Five Currencies It Favors

BCA Research’s strategic recommendation is to sell the U.S. dollar against the South Korean won, Japanese yen, Taiwan dollar, Singapore dollar and euro. The firm’s case is medium-term: the dollar’s yield advantage may fade as the Federal Reserve eventually eases policy, while foreign portfolio inflows become less supportive. 4 6

That does not mean BCA expects the dollar to fall in a straight line. Its research distinguishes between a potentially resilient dollar over the next few quarters and a more bearish outlook beyond a 12-month horizon. 5

BCA’s preferred dollar shorts

BCA’s emerging-markets strategists recommend staying short the dollar against:

• South Korean won (KRW)
• Japanese yen (JPY)
• Taiwan dollar (TWD)
• Singapore dollar (SGD)
• Euro (EUR)

BCA reports long positions in the won, yen and Taiwan dollar against the greenback. The recommended currencies are also supported by current-account surpluses, which could provide a buffer if international investors reduce exposure to U.S. assets. 4

The Swiss franc is not part of this published five-currency basket. That distinction matters because short-term conditions can favor the dollar against CHF even while BCA retains a broader strategic bearish view.

The cyclical argument: Fed easing could remove the dollar’s yield cushion

The most immediate risk to the dollar is a change in the interest-rate relationship between the United States and other economies. If the Fed cuts rates aggressively, U.S. real yields and the premium earned by holding dollar assets could decline. That would weaken one of the greenback’s main cyclical supports.

A BCA scenario published in its forward-looking material has the U.S. policy rate falling to 2.25% in 2026. That figure should be treated as an illustrative scenario rather than a guaranteed policy path. 19

The timing is therefore crucial. Faster-than-expected easing would reinforce BCA’s bearish thesis. Delayed or shallow cuts, persistent inflation or a renewed risk-off shock could instead preserve the dollar’s yield and safe-haven support.

BCA’s more near-term outlook illustrates this tension. The firm has described improving U.S. growth and interest-rate dynamics as reasons for dollar resilience over the coming quarters, while still arguing that the currency’s longer-term downside is larger than its upside. 5

The structural argument: valuation, deficits and capital flows

BCA’s longer-run framework goes beyond interest-rate differentials. The broader 2026 dollar-weakness case identifies several structural pressures:

• U.S. fiscal deterioration and rising debt concerns may make dollar assets less attractive at the margin.
• Dollar valuation is viewed as expensive relative to longer-term fundamentals.
• Foreign portfolio flows could become less supportive if global investors diversify away from U.S. equities and other dollar assets.
• Capital flows may matter more than rate differentials in a new currency regime.

BCA describes a possible shift in which the dollar becomes more pro-cyclical, while the euro becomes more counter-cyclical. In that framework, the dollar would be more vulnerable when global growth and risk appetite weaken, rather than automatically benefiting from every bout of market stress. 3

The threshold for dollar weakness may also be lower than a full-scale exit from U.S. assets: simply receiving smaller foreign inflows could reduce demand for the currency. 3

Could the dollar fall another 8% in 2026?

Historical comparisons cited in the dollar-bearish case suggest a possible additional 8% decline in the DXY index during 2026. 2 That is an analogy-based scenario, not a precise BCA forecast or a timetable for when the move must occur.

The eventual size of any decline depends chiefly on the Fed’s policy path and the behavior of foreign capital. A stronger U.S. growth surprise, sticky inflation, higher Treasury yields or a geopolitical flight to safety could delay the downtrend. Conversely, a sharp easing cycle combined with weaker U.S. growth and reduced portfolio inflows would make the bearish scenario more plausible.

Why the Swiss franc rebound does not necessarily contradict the call

The dollar’s rebound against the Swiss franc ahead of the FOMC minutes was a tactical move, not a direct test of BCA’s five-currency strategic basket. Reports linked the move to concern that higher oil prices could revive expectations of a more hawkish Fed, alongside a relatively accommodative Swiss National Bank. The USD/CHF pair subsequently retraced some of its gains as traders awaited the minutes.

This is the central distinction for interpreting the call:

• Tactical dollar view: The greenback can rally when markets price fewer Fed cuts, U.S. growth improves or investors seek liquidity.
• Strategic dollar view: The currency may weaken later if Fed easing compresses real-rate advantages and capital flows become less favorable.

Short-term rallies are therefore compatible with a longer-term bearish position.

What the 54% client survey says—and does not say

When the DXY was near 100, 54% of BCA’s institutional clients expected the dollar to be weaker 12 months later. 11 The result supports the existence of a bearish tilt among surveyed clients, but it is a sentiment measure rather than independent evidence that the forecast will be correct.

It also creates a positioning risk. If bearish expectations become widespread, the dollar can still produce a countertrend rally when traders unwind short positions or a new risk event increases demand for U.S. liquidity.

What a weaker dollar could mean for markets

If BCA’s strategic thesis plays out, the effects would extend beyond foreign-exchange markets.

Commodities and gold

A weaker dollar can provide a translation and demand tailwind for dollar-priced commodities such as oil and copper. BCA has paired its weaker-dollar positioning with exposure to oil, copper and gold. 10

Gold would also benefit from a softer dollar and reduced real-yield headwinds. BCA has cited those factors, along with longer-term structural support, in its more constructive view on the metal. 3

Emerging-market currencies and funding

Easier dollar funding and less pressure from U.S.-dollar debt could improve emerging-market financial conditions. That would be supportive for currencies such as the won and Taiwan dollar, assuming global growth does not deteriorate sharply at the same time.

Trade and the U.S. economy

A weaker dollar would generally make U.S. exports more price-competitive and imports more expensive. It would not automatically eliminate the U.S. trade deficit, however; the adjustment could instead intensify trade frictions as import costs rise.

The euro and yen

The euro is one of BCA’s principal dollar-short counterparts and could benefit from the proposed shift toward a more counter-cyclical role. 3

The yen could strengthen if U.S.–Japan rate differentials narrow. BCA has cautioned that currency intervention alone is unlikely to create a durable yen reversal without a more meaningful change in those differentials. 8

The bottom line

BCA Research’s strategic position is to sell the dollar against KRW, JPY, TWD, SGD and EUR, not to expect an uninterrupted daily decline. The bearish case requires several developments to align: materially easier Fed policy, lower U.S. real-yield support, weaker foreign inflows, pressure from valuation and fiscal concerns, and a broader shift in how global investors allocate capital.

Until those conditions arrive, the dollar can still rally—particularly against the Swiss franc or other low-yielding currencies. The most useful way to read BCA’s call is as a conditional medium-term thesis: the dollar’s next major downleg depends less on one FOMC release than on whether the Fed and global capital flows eventually remove its remaining structural and cyclical advantages.