Bank of America Predicts Further U.S. Dollar Decline Amid Trade Uncertainties
Bank of America has issued a cautionary outlook for the U.S. dollar, anticipating continued weakness this summer following a steep drop earlier this year.
The dollar index, which tracks the currency against a basket of global peers, has declined nearly 9% to 99.74 in 2025. This downtrend has been largely driven by escalating trade disputes initiated under President Donald Trump’s tariff policies, causing investors to shift away from U.S. assets.
In a detailed report, the bank’s global FX research team, led by Athanasios Vamvakidis, pointed out that tariffs are increasingly detrimental to the U.S. economy, which remains deeply interconnected with global trade.
While the economy has shown resilience due to tax cuts and moderated fiscal austerity, the report emphasized that policy uncertainty—especially around trade—continues to weigh heavily on business confidence and investment plans. The team expects tariff rates to climb beyond current levels, creating further headwinds.
Additionally, loosening fiscal policy amidst record debt levels is contributing to higher borrowing costs, while the Federal Reserve faces constraints in addressing inflation pressures.
High-frequency economic indicators such as the ISM manufacturing index and the Dallas Fed’s weekly economic activity index have recently weakened, signaling potential slowing growth ahead.
Despite these challenges, a softer dollar typically benefits dollar-denominated assets, including gold and bitcoin, which could see increased demand as investors seek alternative stores of value.
