The U.S. dollar’s recent slide has less to do with trade and more with the Fed’s indifference to rising inflation expectations, according to JPMorgan analyst Meera Chandan.

The sharp drop in U.S. real yields, fueled by the Fed's hands-off approach, has pushed the greenback lower. Chandan believes this de-risking cycle is running out of steam, with nearly 75% of the post-October dollar buying already unwound.

Yen Rally Faces Headwinds

While the yen has surged, Chandan warns that its strength may be short-lived. The Bank of Japan's policy stance, stretched speculative positioning, and significant domestic outflows could cap further gains. Policymakers are also showing discomfort with the rapid sell-off in Japanese government bonds, suggesting the yen's momentum may soon stall.

For U.S. investors looking to play this theme, the WisdomTree Japan Hedged Equity ETF DXJ offers exposure to Japanese equities while hedging yen risk.

China Stocks Rally, But Yuan Lags

China's AI-driven stock surge, powered by breakthroughs like Deepseek and a slower tariff rollout, has yet to lift the Chinese yuan. Unlike past rallies, JPMorgan sees limited upside for the yuan, projecting 7.40 by the second quarter and 7.50 by year-end. Solid domestic U.S. dollar demand and a smaller foreign investor footprint are keeping the yuan in check.

Investors eyeing Chinese equities without FX risk might consider the KraneShares CSI China Internet ETF KWEB.

JPMorgan's Playbook: Watch For A Dollar Rebound

Chandan recommends a cautious approach: stay modestly long U.S. dollars, reduce Euro shorts and take profits on Japanese yen baskets.

With the U.S. dollar's sell-off losing momentum and tariff risks still looming, JPMorgan's call is clear — the dollar's floor might be closer than markets think.

The Invesco DB US Dollar Bullish ETF UUP could be a practical way to position for a rebound.

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