Has the Weak Dollar Trend Ended? Goldman: The Worst Days of Dollar Depreciation Are Still Ahead

TradingKey - Despite the U.S. Dollar Index (DXY) falling below the 100 mark, the chorus of bearish calls on the dollar from Wall Street has not abated. Goldman Sachs believes that the negative impact of Trump's tariff policies on the U.S. economy may only become apparent in the summer, leaving room for further structural depreciation of the dollar.

On April 24, Jan Hatzius, Goldman Sachs' chief economist, wrote in the Financial Times that despite a recent 5% depreciation in the dollar based on its broad trade-weighted exchange rate, there is still room for further declines.

The economist pointed to periods with similar dollar valuations—namely, the 1980s and the early 2000s. Referencing these two periods, he suggested that the current dollar exchange rate could depreciate by an additional 25-30%.

Hatzius cited several reasons for this outlook: non-U.S. investors continuing to sell U.S. assets, and the U.S. economy potentially struggling to outperform other economies over the next few years.

In another recent report, Goldman Sachs noted that U.S. consumers’ advance purchasing likely boosted consumption data in March and April, but this is only temporary. The adverse economic effects of the tariff policy may start to become evident by mid-May or early June, such as weak hiring and large-scale layoffs.

From Wall Street’s perspective, uncertainty remains a significant risk under Trump's administration. This is reflected in ambiguous policy signals, rapid shifts in policy implementation and reversals, and unpredictable policymaking dynamics. These challenges are making it difficult for U.S. businesses to operate and suppressing economic activity.

Deutsche Bank previously stated that U.S. tariff policies, fiscal stimulus in Germany, and a global reassessment of America's role on the world stage would lead to increased selling of dollar-denominated assets, further weakening the dollar.