The Bloomberg Dollar Spot Index fell to its lowest level in six months as renewed uncertainty surrounding the Trump administration’s tariff policy triggered investor flight from US assets and increased pressure on the greenback.
The index declined by 0.3 percent on Monday to extend its year-to-date loss to nearly 6 percent.
The decline follows President Donald Trump’s remarks over the weekend reaffirming his administration’s commitment to impose tariffs on a broad range of imported consumer electronics.
His comments downplayed an earlier announcement suggesting a temporary reprieve, calling it a procedural step. Trump stated that “nobody is getting off the hook” in a post on social media as markets opened in Asia.
Analysts say the contradictory signals from Washington are undermining investor confidence and raising concerns about long-term US trade and economic policy.
The resulting market reaction has increased the demand for safer assets and intensified bearish sentiment on the dollar.
According to data compiled by Bloomberg and the Commodity Futures Trading Commission, speculative short positions on the dollar have continued to rise.
A Bloomberg survey showed that nearly 80 percent of market respondents expect the dollar to weaken further in the coming month, the highest percentage of bearish sentiment since the survey’s inception in 2022.
Jordan Rochester head of macro strategy for EMEA at Mizuho International said the ongoing weakness in the dollar despite adjustments to the tariff rollout reflects a “toxic combination” of policy confusion and deteriorating investor sentiment.
He added that US rates continue to sell off, creating additional headwinds for the currency.
Three-month risk reversals on the dollar — a key measure of demand for options protection — dropped to the lowest level since the early stages of the COVID-19 pandemic in 2020.
The data signals a growing investor appetite for hedging against further declines in the US currency.
Strategists at major banks like JPMorgan Chase, Goldman Sachs and Mizuho forecast additional pressure on the dollar in the near term.
Goldman Sachs warned that tariffs could erode consumer purchasing power and compress corporate profit margins, weakening the foundational support for the dollar’s strength in recent years.
JPMorgan analysts also flagged the rising probability of a US recession, which could accelerate capital outflows and weaken the dollar further, particularly against the yen and euro.
Mizuho expects the dollar to decline by another 5 percent on a trade-weighted basis before any potential rebound.
Minneapolis Fed President Neel Kashkari dismissed expectations that the central bank would move to stabilize financial markets.
He said the Fed has limited influence over the structural impact of trade policy decisions.
As volatility climbs and market participants remain cautious, investors are closely watching policy updates and economic indicators for direction.
Analysts believe sustained clarity and a consistent trade policy will be critical to restoring confidence in US markets and stabilizing the dollar in the months ahead.
