The U.S. dollar declined for a fifth consecutive session on Monday, weighed down by renewed concerns over trade tensions and the potential economic fallout from President Donald Trump’s tariff policies. Investors largely dismissed a temporary exemption from certain electronics tariffs after Trump clarified that no sector would be spared from upcoming duties.
The Bloomberg Dollar Spot Index fell 0.2%, hitting its lowest level since October during early Asian trading. The gauge has now lost nearly 6% this year, dragged by escalating trade friction with China, growing uncertainty over U.S. policy, and mounting fears of a slowdown in economic growth.
Despite an earlier announcement that appeared to offer a brief reprieve for the technology sector, Trump took to social media to reinforce his hardline stance, saying, “NOBODY is getting ‘off the hook,’” and reaffirming that tariffs would still apply to consumer electronics, including phones and computers.
“For the U.S. dollar to rally sustainably, a rapid resolution to the trade war is essential before deeper damage is inflicted on the U.S. economy,” said Dane Cekov, senior macro and currency strategist at Sparebank 1 Markets in Oslo. “We expect the dollar to weaken further in the coming months as the impact of tariffs is reflected in consumer behavior, inflation, and labor market data.”
A Bloomberg survey revealed nearly 80% of respondents expect further dollar weakness in the next month — the largest proportion of bearish sentiment since the survey began in 2022. Meanwhile, a measure of dollar volatility remains near a two-year high, and speculative traders increased their short positions on the greenback in the week ending April 8, according to data from the Commodity Futures Trading Commission.
Adding to investor uncertainty, Federal Reserve Bank of Minneapolis President Neel Kashkari said Sunday that the central bank has limited ability to offset the economic shifts caused by the evolving trade landscape. His remarks followed comments from Boston Fed President Susan Collins, who hinted at potential intervention. Kashkari countered that markets are adjusting to a “new normal” the Fed cannot control.
Strategists across Wall Street are preparing for more weakness in the dollar. JPMorgan Chase & Co. analysts said sentiment remains bearish, particularly against the yen and euro, as the risk of a U.S. recession continues to loom. Analysts at Mizuho Bank Ltd. projected the dollar could fall another 5% on a trade-weighted basis, referencing historical parallels from 2017–2018 and the COVID-19 pandemic period.
Goldman Sachs analysts, including Kamakshya Trivedi, argued that the structure and implementation of Trump’s tariffs are actively eroding business and consumer confidence. “If tariffs squeeze U.S. corporate profit margins and reduce real income for consumers, they could undermine the perception of American economic strength — the backbone of dollar resilience,” the team wrote.
That erosion is already being priced into markets. Demand for hedging against further dollar depreciation has soared to its highest level in five years. An index tracking three-month risk reversals — the difference between bullish and bearish options on the dollar — has dropped to its lowest point since March 2020, during the height of the global pandemic, according to Bloomberg data.
As market volatility rises and investors brace for prolonged economic strain, the dollar’s path forward appears increasingly uncertain.
Related topics:
How Can Speculators Use Currency Futures?
