US Dollar Outlook Tumbles Amid Reciprocal Tariffs: Reuters Poll
BENGALURU – Foreign exchange strategists expect the US dollar to remain steady in the coming months, despite growing concerns about the economic impact of President Donald Trump’s erratic tariff announcements. More than a third of experts believe the dollar’s traditional role as a safe haven is being undermined by new pressures from trade policies, according to a recent Reuters poll.
Tariffs and Market Impact
Trump is expected to impose reciprocal tariffs on US trading partners on Wednesday, adding to those already announced. White House aides have drafted a proposal to impose tariffs of around 20% on most imports into the US. Claudio Irigoyen, head of global economics at Bank of America, said the delay could be about a month to give room for talks, but it would still put currency markets under pressure.
Market sentiment and FX volatility
The Japanese yen jumped in the session, while the dollar and euro held near Monday's levels. The dollar index, which measures the greenback's strength against six major rivals, edged up to 104.30. The yen's rise was seen as a sign of safe-haven demand, as investors worried that new tariffs could hurt the US economy.
European Commission President Ursula von der Leyen said the EU was ready to negotiate with the US on trade, but warned that retaliatory measures would be taken if necessary. The euro fell 0.3% to $1.0788 after rising 4.5% in the first quarter, largely on Germany’s pledge to increase fiscal spending.
Warnings about the long-term outlook for the dollar
“Investors are tired of trying to position themselves against the uncertain outcomes of tariffs, and this has dampened sentiment,” said Paul Mackel, global head of FX research at HSBC. Of the 35 strategists surveyed, only two believe there will be a reversal in net longs, while the rest are largely unchanged or inclined to increase net shorting.
Analysts at Deutsche Bank also expressed concern about the dollar’s potential to lose its long-term safe-haven status if economic factors such as weakening US institutions and global regulatory standards are not strengthened.
Expectations and Outlook for the Next 12 Months
Despite concerns about the impact of tariffs and uncertainty over trade policy, some strategists remain confident that the fundamentals of the US dollar will not change significantly over the next six to 12 months. JP Morgan’s Arindam Sandilya said that “the erosion of the dollar is likely to be gradual, allowing investors time to adjust their investment strategies.”
Against this backdrop, investors are closely watching key economic data, such as the Job Openings Survey and the ISM Manufacturing Index, to gauge the extent to which tariffs are impacting the US economy.
Conclusion
Despite the uncertainty from reciprocal tariffs, many foreign exchange experts still believe the US dollar will maintain relative stability in the short term, a Reuters poll found. However, risks related to the USD's fading safe-haven status and trade policy volatility could create downward pressure over the long term.
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