The U.S. dollar has seen a mild recovery recently, lifted by renewed optimism surrounding trade discussions that could shape the next phase of the Trump administration. However, deeper concerns about the dollar’s long-term stability and America’s financial reliability are expected to keep the greenback from gaining too much ground, according to a recent analysis from Macquarie.
While upbeat headlines about trade have sparked some short-term positivity, analysts at Macquarie caution that underlying fears about the U.S. being a financial risk particularly as a counterparty are far from resolved.
“A significant part of the dollar’s recent weakness, especially through March and April, stems from structural doubts about the U.S. itself,” the note said. “These doubts aren’t going away just because the U.S. is re-engaging globally.”
Since the beginning of President Trump’s second term, the U.S. Dollar Index has slipped by nearly 10%. That’s a dramatic drop, marking one of the steepest early-term declines for a U.S. administration in modern history. Analysts say the fall reflects broad investor skepticism about American assets driven by political instability, aggressive trade moves, and a worrisome fiscal outlook.
Looking ahead, the next 100 days are expected to be dominated by diplomatic negotiations and softened trade stances. But even if all tariffs were rolled back, Macquarie argues that the structural damage has already been done, and a full rebound for the dollar seems unlikely without a major political shift.
“The weakening trend we saw in the early months of the year won’t be easily undone. The root of the issue isn’t just tariffs or diplomacy it’s the perception that the U.S. is no longer a fully dependable financial partner,” the analysts explained.
In a more sobering assessment, Macquarie also pointed to the possibility that the dollar may no longer enjoy its historical status as the world’s ultimate safe-haven currency. They warn that actions taken during the Trump administration have weakened the perceived integrity of key U.S. institutions, including the balance of power that underpins trust in the American system.
As a result, investors and countries may increasingly look to diversify their holdings away from the U.S., seeking alternatives to limit exposure to potential risks tied to Washington’s decisions.
“In the future, the dollar might be seen less as a must-have global reserve currency and more as one option among several, like the euro,” the note concluded. “This is the larger threat facing the dollar once current short-term volatility clears.”
