U.S. dollar poised for worst first 100 days of presidency since Nixon

Speculative traders, including hedge funds and asset managers, are all betting against the U.S. dollar. Photo by Marian Vejcik/Getty Images/Postmedia files

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The U.S. dollar index has lost almost nine per cent between Jan. 20 — when Donald Trump returned to the White House — and April 25, putting it on course for the biggest loss through the end of the month since at least 1973. The president’s first 100 days in office in recent decades have been marked by strength in the country’s currency, with returns averaging close to 0.9 per cent between 1973, when Richard Nixon began his second term, and 2021, when Joe Biden took office.

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Meant as a temporary measure, the so-called Nixon shock of 1971 caused the dollar to drop, effectively ending the Bretton Woods system of fixed exchange rates established after the end of the World War II.

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Trump during the early innings of his second presidency followed through on various campaign pledges, introducing new tariffs and dialing up the rhetoric against China and other U.S. trading partners. His tariff policy has led investors to pile into assets outside of the U.S., weakening the greenback and lifting other currencies alongside gold. The euro, Swiss franc and yen have risen more than eight per cent each against the dollar since Trump’s return to the presidency.

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“The ubiquity of the U.S. dollar and its role in international trade and finance came with deep trust in U.S. institutions, low trade and capital barriers as well as a predictable foreign policy,” said Bipan Rai, a managing director at BMO Global Asset Management. “Now? There are clear signs of erosion which points to change in global asset allocation trends which don’t favour the U.S. dollar. We sense this is a structural shift,” he said.

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Trump’s policy initiatives have also increased the risk of a U.S. recession combined with re-accelerating inflation, limiting the scale of potential interest rate cuts by the Federal Reserve.

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The president’s comments about Fed Chair Jerome Powell — especially his threat to fire him — have put investors on alert, elevating concerns over the U.S. central bank’s independence. Trump later said he had no intention of firing Powell.

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UBS Group AG as a result cut its dollar forecast for the second time in less than two months. Analysts stated that the greenback’s performance hinges on the outcome of the U.S.-China stand-off, which hasn’t seen much progress in recent weeks.

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Deutsche Bank AG this week warned of a structural downtrend for the dollar in the coming years, which could knock the U.S. currency to its weakest level in more than a decade against the euro.

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Speculative traders, including hedge funds and asset managers, are all betting against the dollar. The group is the most short dollar since October 2024, with bearish bets on the U.S. currency worth about US$10 billion during the week ended April 15, according to data from the Commodity Futures Trading Commission.

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—With assistance from Sebastian Boyd and Tatiana Darie.

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