Dollar sliding, but pace can't last

There are plenty of fundamental economic reasons to hold a long-term negative view on the US dollar, but the selling and bearish sentiment currently smothering the greenback may be overdone.

- Jamie McGeever

The dollar has lost 5% of its value against a basket of major currencies since President Donald Trump's tariff "Liberation Day" on April 2, and has fallen 10% since mid-January, when it was its strongest in more than two years.

The economic and policy uncertainty caused by Mr Trump's trade war and its chaotic implementation have dimmed the dollar's allure, while Mr Trump's drive to rip up the world economic order of the last 80 years and his attacks on Federal Reserve Chair Jerome Powell have also alarmed investors.

What's more, if the Trump administration is to revive US manufacturing, reduce the trade deficit and rebalance global trade, a weaker exchange rate must be part of the plan.

Clarity around some of these issues may not come for a while. The US-China tariff truce expires on July 9, and Mr Trump's tax-cut bill may not be finally approved until the July 4 recess, by which time the debt ceiling issue will be coming on investors' radar again.