Accelerated De-dollarization, Bearish Sentiment on the Dollar Reaches Historic Extreme! Can the Dollar Index Hold 100?

TradingKey - Amid the sharp decline in the U.S. dollar and Treasury bonds, U.S. President Donald Trump’s tariff war has escalated into a broader battle to defend confidence in the U.S. currency. Wall Street analysts are warning that the administration’s extreme and unpredictable policies are undermining the dollar's long-held status as a premier safe-haven asset.

On Monday, April 14, following four consecutive sessions of losses, the U.S. Dollar Index (DXY) continued its slide, falling 0.51% intraday to 99.59. Over the past week, the dollar index has dropped 2.84%, and since the beginning of April, it has fallen by 4.50%.

As investors move away from dollar-denominated assets, traditional safe havens such as the Japanese yen and euro have surged. The dollar-yen exchange rate (USD/JPY) fell more than 2% last week and is currently trading at 142.96. Meanwhile, the euro-dollar exchange rate (EUR/USD) has jumped  3.70% to 1.1374.

Jim Grant, founder of Grant’s Interest Rate Observer, remarked that the historical strength of U.S. Treasuries and the dollar has relied heavily on global confidence in America’s fiscal and monetary governance, as well as the stability of its political and financial institutions. That confidence, he suggested, is now being reconsidered.

Analysts at TD Securities noted that the U.S. economy’s growth advantage over the rest of the world has finally vanished. As investors are increasingly looking to Europe and select Asian markets,  sentiment toward the dollar has deteriorated sharply in a short span of time.

Deutsche Bank analysts echoed these concerns, saying the market is reassessing the structural appeal of the dollar as the world’s reserve currency, and that a rapid process of "de-dollarization” is underway. 

According to  Z-score analysis—which measures how far current prices deviate from historical norms— the scale and pace of the shift toward bearish dollar positions are among the most extreme ever recorded.

With little expectation that Trump will abandon his unpredictable style of governance, Wall Street is turning its "last hope" to the Federal Reserve. Major financial institutions such as Goldman Sachs and Deutsche Bank have recently urged the Fed to step in to calm financial markets and restore investor confidence.

Strategists at National Australia Bank warned that unless a resolution emerges soon,  markets are likely to follow the path of least resistance—continuing to exit dollar assets.