"Triple threat" strikes! Institutions warn: Seasonal weakness of the US dollar may worsen in the coming weeks.

Multiple institutions have warned that the US dollar may face a "triple blow" in the coming weeks, which could exacerbate the currency's already seasonally weak trend. South Africa's Standard Bank said the dollar could be impacted by factors including a Supreme Court ruling in the US declaring tariffs illegal, White House National Economic Council director Kevin Hassett being appointed as the next Federal Reserve chairman, and the yen strengthening following a rate hike by the Bank of Japan this month. Steven Barrow, head of G10 foreign exchange strategy at Standard Bank, said, "If the tariff ruling goes against the US, and with Hassett leading the Fed, Japan adding to its rate hike cycle would almost certainly be a 'triple blow' for the dollar. Even if it doesn't happen in the remaining weeks of this year, it's almost certain to play out in the early part of 2026." As year-end forex trading gradually slows down, market liquidity tends to decrease as investors close out existing positions before establishing new ones in the new year. Barrow added that while seasonal trading activity may be subdued, it would be "incredible" to think that the dollar would not be affected if the main pillar of Trump's policies (i.e. tariffs) were deemed illegal. Deutsche Bank also believes that the Bank of Japan has room to hike rates, while stronger economic data from other countries may weaken the dollar towards the end of the year. Tim Baker, macro strategist at Deutsche Bank, said that December has been the worst performing month for the dollar over the past decade as traders typically sell the dollar to balance out gains from other US assets throughout the year. He added that a potential rate hike by the Bank of Japan, along with unexpected positive data from economies outside the US, could lead to a reversal of recent dollar buying in this month. Data shows that the US dollar index has already risen by 1.5% this quarter, on top of a nearly 1% gain from July to September (when the index rebounded from a three-year low), indicating a certain level of resilience. However, Baker stated, "We think the dollar could fall back towards its third-quarter lows, a drop of about 2% from current levels." The potential pick for the next Federal Reserve chairman has added another pressure point for the dollar. Trump has hinted at appointing Hassett to lead the Fed. It is widely believed that Hassett supports a more aggressive rate cutting policy, and his appointment could further strengthen the market's expectations for rate cuts by the Fed next year. Van Luu, global head of currency at Russell Investments, said, "The market believes that under Hassett's leadership, Fed policy could become more dovish." He added that Hassett's appointment could push the dollar below its four-year low against the euro of around 1.19 dollars per euro. Furthermore, Standard Bank and Deutsche Bank said that historical experience of rising Japanese interest rates often leads to a significant appreciation of the yen, particularly against the dollar. The market has increased bets on a 25 basis point rate hike by the Bank of Japan this month. Following the Bank of Japan's most explicit tightening signal on Monday, the probability of a rate hike by the Bank this month has risen to 80%.