#FedRateCutAffectsDollarTrend Shift in Capital Flows: A rate cut by the Federal Reserve can lead to a shift in capital flows, as lower interest rates typically reduce the returns on U.S. assets, such as bonds. Investors may move their capital to countries offering higher returns, thereby reducing demand for the U.S. dollar. This decrease in demand can weaken the dollar’s value against other currencies, as funds are redirected to markets with better investment opportunities.