Dollar Bears Seize on Notion of Crumbling US Exceptionalism

(Bloomberg) -- President Donald Trump’s tariff threats erstwhile again lifted the dollar past week, but a increasing radical of investors is betting against the greenback amid signs the US system is cooling and connected interest a commercialized warfare volition weaken it further.

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The expanding chorus of greenback bears includes plus managers Invesco and Columbia Threadneedle and hedge money Mount Lucas Management. On Wall Street, Morgan Stanley and Societe Generale are informing clients that going agelong the dollar is an overcrowded commercialized that whitethorn not clasp up.

They’re looking past the regular gyrations sparked by tariff announcements, and arsenic they spot it, the communicative astir the greenback is lone darkening. Instead of deriving enactment from the imaginable that import levies could reignite ostentation and support involvement rates elevated, there’s present interest that each the uncertainty astir tariffs risks undermining an system that already shows signs of cooling.

The effect is that marketplace expectations for Federal Reserve interest-rate cuts person intensified, diminishing the greenback’s appeal. And the aura of US economical exceptionalism that underpinned the dollar’s 7.1% surge past 4th is dimming arsenic investors ponder Trump’s home and overseas policies, that see efforts to slash national expenses and broke a bid woody betwixt Russia and Ukraine.

“I don’t deliberation helium tin nonstop the dollar overmuch higher, due to the fact that it’s truly expensive,” said Kit Juckes, caput of currency strategy astatine SocGen successful London. “But tin helium nonstop it lower? He perfectly can, if helium damages the US economy.”

Market Peril

The world’s superior reserve currency is present astir 2% beneath the post-election highest it reached earlier Trump’s inauguration, amid a risk-on question that besides boosted stocks and Treasury yields.

Last week drove location the peril of going abbreviated the dollar successful the existent environment. The greenback surged connected Thursday, paring its February decline, aft Trump said that 25% tariffs connected Mexico and Canada would instrumentality effect March 4. He besides said helium would enforce an further 10% taxation connected Chinese imports.

The US currency extended gains connected Friday successful the aftermath of a heated speech betwixt President Trump and Ukraine’s Volodymyr Zelenskiy, starring to the illness of a bid statement with Russia and a imaginable woody connected captious minerals. In an interrogation aft the Oval Office bustup, Treasury Secretary Scott Bessent reiterated that tariffs are apt to make important revenue.