Biggest Weekly Drop for the Dollar Since 2022 Amid Tariff Chaos:
The U.S. dollar index recorded its worst weekly performance in more than two years,
impacted by the effects of American protectionist policies.
This has fueled expectations that such trade policies could lead to slower growth in the world’s largest economy.

Contents

Sharp Decline in the Dollar Index

Growing Pessimism Toward the Dollar

Defensive Spending Plans

Sharp Decline in the Dollar Index Amid Reduced Bullish Bets

The Bloomberg Dollar Spot Index fell 2.3%,
marking its biggest weekly decline in closing levels since November 2022.
Data from the Commodity Futures Trading Commission (CFTC), as of March 4,
revealed that speculators, including hedge funds and asset managers,
Since October, just before the U.S. presidential elections,
they have been reducing their bets on a stronger dollar for seven consecutive weeks,
bringing bullish positions to their lowest levels.

Growing Pessimism Toward the Dollar

This increasing pessimism follows a strong rally in the dollar,
which began after last year’s elections,
driven by relatively high interest rates and tariff policy promises.
However, former President Donald Trump imposed tariffs only to postpone their implementation later,
creating uncertainty that clouded the economic outlook for the U.S.
In contrast, Europe, particularly Germany, ramped up spending plans,
pushing the euro to its best weekly performance since 2009.

On Friday, currency strategists at JPMorgan, led by Meera Chandan, stated:
“This week marked a shift in the foreign exchange market landscape,
which has consequently influenced our portfolio strategy.”

The team indicated they are now strategically shorting the dollar for the first time in over a year,
citing waning U.S. economic exceptionalism and a recovery in Europe.
This move places JPMorgan among Wall Street analysts who have turned bearish on the dollar.

Defensive Spending Plans Boost the Euro

On the other hand, European spending plans helped strengthen regional currencies.
The Swedish krona outperformed all G10 currencies against the dollar this week,
rising by 7%, followed by the euro, which gained 4.6%.
Meanwhile, the Canadian dollar lagged behind its peers, weighed down by tariff-related risks.

Lee Ferridge, a strategist at State Street, commented:
“Germany’s large-scale fiscal shift has strengthened growth expectations in the eurozone,
just as concerns over U.S. growth prospects have increased.”

Following weaker-than-expected U.S. labor market data, the Dollar Index declined 0.4% on Friday.
However, it pared losses after Federal Reserve Chair Jerome Powell
acknowledged rising uncertainty in the U.S. economic outlook while emphasizing
that policymakers would not rush to adjust monetary policy.

According to the CFTC, speculators now hold $9.7 billion in long dollar positions,
down $5.7 billion from the previous week.
This marks a significant retreat from the January peak of over $34 billion in bullish bets.

Biggest Weekly Drop for the Dollar Since 2022 Amid Tariff Chaos

Biggest Weekly Drop for the Dollar Since 2022 Amid Tariff Chaos

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