The king of currencies has been demoted

It’s not just your portfolio that’s worse off these days—even your spare change has plummeted in value.

While the dollar has historically been the world’s most dominant currency given its liquidity and preeminence in global finance, the tariff-induced market chaos of the past month drove the greenback to a three-year low last week. Though it’s since recovered a bit, the dollar is still down 8.82% this year—putting it on pace for its worst first 100 days of a presidency since Richard Nixon in 1973.

Investors are ditching the dollar for the same reason they’re fleeing US stocks: Many are just plain pessimistic about the state of the US economy, even after the White House eased the global trade war tension (sort of). But another factor driving the bearishness is President Trump’s threat to erode the independence of the Federal Reserve, which has made investors skeptical that the central bank will be able to operate effectively.

In fact, foreign traders who previously invested in US assets like the buck are now hedging the dollar with other currencies, which further exacerbates the dollar dilemma and illustrates just how negative sentiment is about the dollar’s future.

No more dollar dollar bills y’all?

Optimism about the dollar is as hard to find right now as a $2 bill. The pros don’t think the greenback is poised to make a big recovery anytime soon, either: Analysts from Wall Street banks such as Deutsche Bank, Bank of America, and Goldman Sachs have all said the dollar will likely weaken even further.

“The pre-conditions are now in place for the beginning of a major dollar downtrend,” wrote Deutsche Bank strategists George Saravelos and Tim Baker in a note last week.

An even harsher take: “I believe that the recent dollar depreciation of 5% on a broad trade-weighted basis has considerably further to go,” wrote Goldman Sachs Chief Economist Jan Hatzius in a Financial Times opinion piece last week.

Zoom out: In the long term, many don’t believe the dollar is going to totally lose its status as the king of currencies: “While we acknowledge the risks, largely owing to concerns over fiscal deficits, we do not believe the conditions currently exist for the US dollar to lose its status as the global reserve currency,” wrote UBS Chief Investment Officer of Global Equities Ulrike Hoffmann-Burchardi today. —LB