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(Bloomberg) -- In a week that saw an epic rally in US stocks and recession calls cast aside, currency traders are just as bearish as ever on the American dollar.
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Strategists at JPMorgan Chase & Co. and Deutsche Bank AG say the currency will keep weakening, and sentiment among options traders is the most negative in five years. The dollar index is still close to its April lows, evidence that investors are wary of returning despite the easing of China trade tensions that lifted other markets.
It’s been a volatile ride, with the greenback having plunged more than 6% in 2025 against a basket of currencies, its worst year so far in Bloomberg data going back two decades. In the view of many, US policymaking continues to be erratic and unpredictable, making the currency less attractive as the Federal Reserve commits to a wait-and-see stance. And despite denials from Washington, some investors still suspect the Trump administration of wanting a weaker dollar to shore up the US manufacturing base.
“The combination of lower growth, stickier inflation, and even a neutral Fed, coupled with continued US policy uncertainty, should keep the dollar on the backfoot,” said Kristina Campmany, a senior portfolio manager at Invesco. “When the significant stock of US assets, particularly equities, owned by the rest of the world is taken into consideration, we continue to believe the US dollar decline has only just begun.”
Bets in the options market on a decline in the dollar over the next year are now at the highest level since 2020. These long-term options are typically used by money managers rather than short-term speculators, reinforcing the argument that a broader reassessment of dollar exposure is taking place.
“US exceptionalism is eroding gradually, and these moves have longer to run,” Kamakshya Trivedi, head of global currencies at Goldman Sachs Group Inc., said on Bloomberg TV this week.
Unhedged and Burned, Stock Investors Brace for More Dollar Pain
Meanwhile in stocks, the S&P 500 has rallied more than 5% this week as President Donald Trump’s tour in the Middle East fanned optimism for tech deals and inflation data was subdued. US equity funds attracted about $19.8 billion in the week through May 14, the first inflows in five weeks, according to a note from Bank of America Corp. citing EPFR Global data.