The US dollar is plummeting due to trade war fears and confidence crisis

From Yahoo Finance: 2025-04-03 17:57:00

The US dollar index plummeted over 2% Thursday morning as investors fear US growth prospects following tariff announcements. The index hit its lowest level since October, with Deutsche Bank expressing concerns over a broader confidence crisis. The trade war has shifted focus from inflationary impacts to rate cut expectations.

Currency analyst George Saravelos cited President Trump’s tariff approach as damaging policy credibility and undermining trust in Washington’s leadership. Treasury Secretary Bessent’s emphasis on fiscal tightening post-tariff news further weakened US growth expectations. Saravelos warned of potential capital flow shifts and disorderly FX moves amidst a market regime change.

Saravelos previously warned of the dollar losing its safe-haven properties, pointing to a decline in correlation with risk assets and a US current account deficit. A drop in the dollar, US equities, and rising term premiums in Treasuries signal accelerating disinvestment from the US. The 10-year Treasury yield also fell to its lowest level since October.

Read more: The dollar is spiraling amid a ‘confidence crisis’ sparked by Trump’s trade war