Is confidence in the dollar beginning to fade?

Uncertainty has a price. IMF concerns are growing over the economic fallout from Donald Trump’s trade war. It has reported that the US economy will experience slower economic growth and higher prices, in part due to US President Donald Trump’s global tariffs. Growth is now expected to be 1.8% this year, down from the influential financial agency’s estimate of 2.7% for the US in January.

Tariffs are spooking investors, stocks are taking a hit, bond yields are climbing and the dollar has dropped around 9% since mid-January. This isn’t how the US economy usually behaves in times of crisis.

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In past shocks – from the Great Recession of 2008 to the Covid pandemic – the dollar typically surged as global investors sought a safe haven. Treasury yields dropped, making it cheaper for Americans to borrow and spend. But right now, the usual rules just don’t seem to apply.

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Of course, Trump has called for a weaker dollar to boost US exports. But some fear his combative trade policies are now eroding faith in the very idea of American exceptionalism – a shift that could reshape how investors view US assets.

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“A reassessment and a repositioning,” was how IMF chief economist Pierre-Olivier Gourinchas described the investor pullback – a shift, he said, that followed last year’s surge in US inflows driven by economic strength and the AI boom.

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Still, he pushed back on talk of the dollar losing its safe-haven status.

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“As of now, we think that the US dollar remains an anchor currency for the international monetary system, and the rebalancing that we’re seeing is fairly modest,” Gourinchas said.

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A weaker dollar could mean higher prices for imported goods. It could also mean more headaches for Washington when it comes to refinancing the nation’s staggering debt. Source: BBCB