Why the dollar's decline could be here to stay

With the dollar index trading near a three-year low, one strategist sees further downside looming against major currencies like the euro.

Though the dollar index recovered some of its losses on Tuesday and Wednesday, it traded near its lowest levels since January 2015, just above the 90 mark. Pressure on the greenback likely will continue, said Kathy Lien, managing director of foreign exchange strategy at BK Asset Management. Here are her reasons why.

• The U.S. dollar is falling as U.S. equities come under pressure after a remarkable rally, and U.S. Treasury yields haven't seen much of an uptick after surging last week.

• What makes the dollar's decline durable, however, is global central banks' simultaneous shift toward tightening monetary policy. Last week, the European Central Bank said it was revisiting its monetary policy early this year, which were perceived as hawkish for the euro.

• Meanwhile, the Bank of Japan earlier this month adjusted its bond purchases, sending the Japanese yen higher, and it was reported that the Chinese government was moving toward halting U.S. Treasury purchases.

• The Federal Reserve has reiterated it plans to hike interest rates this year. Still, there's little question that central banks around the world are slowly catching up.

Bottom line: The U.S. dollar may weaken further as central banks around the world tighten monetary policy and foreign currencies weigh on the greenback.

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