The U.S. dollar just notched its best week in two months, a move many would dismiss as a short-term bounce in a longer-term decline, especially with lower U.S. interest rates on the horizon. But the bull case for the tarnished greenback is surprisingly persuasive.
The 1.3% rise in the dollar’s broad value last week was largely a consequence of the yen’s sharp slide in response to political developments in Japan. Remove that, and the dollar’s gloomy outlook has not gotten much brighter.
The Federal Reserve is cutting interest rates while most of its peers have stopped easing. Crucially, President Donald Trump and Treasury Secretary Scott Bessent have made a weaker dollar a pillar of their economic strategy to boost U.S. exports, reduce the trade deficit, and resuscitate the U.S. manufacturing base.
Add to that the ‘de-dollarization’ narrative, in which the world reduces its exposure to U.S. assets in response to Trump’s controversial policy agenda, and you might wonder what the bullish case for the dollar looks like.
Standard Chartered’s head of G10 FX research Steven Englander and team are among the few analysts calling time on the dollar decline. They predict the euro will fall to $1.12 within the year from $1.16 currently
