Investors Show Record Pessimism on the Dollar Amid Rising US Uncertainty

Investment fund managers are displaying the most pessimistic outlook on the US dollar in a decade, reflecting growing uncertainty around the country's economic and political direction.

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US dollar notes

The Financial Times reported this trend, citing a survey conducted by Bank of America among international investors. The research indicates that confidence in the American currency continues to decline, with institutional investors increasingly reevaluating their asset allocation strategies.

Dollar Weakness Deepens

Since the start of 2026, the dollar has lost roughly 1.3 percent, continuing the significant decline recorded in 2025. The currency is now approaching its lowest levels in four years, highlighting a persistent trend of reduced appeal for the dollar as a safe-haven asset, despite its traditional role as the world's primary reserve currency.

According to International Monetary Fund data, the dollar's share of global currency reserves has dropped from over 70 percent in the early 2000s to roughly 58 percent in recent years, reflecting central banks' gradual diversification of reserves.

Investor Sentiment Hits Decade-Low

The Bank of America survey showed that fund managers' willingness to increase dollar investments reached its lowest point since at least 2012. Negative sentiment intensified compared with April 2025, when the administration of Donald Trump implemented large-scale import tariffs. These measures shook global markets, heightened inflation risks, and cast doubt on the predictability of the US economic policy.

Additional pressure on the dollar came from geopolitical decisions and increased scrutiny of key financial institutions, including the Federal Reserve. Investors traditionally perceive political influence on central banks as a risk factor, given that the independence of monetary policy is critical to currency stability. Erosion of confidence in institutional resilience has deepened doubts about the dollar's ability to serve as a primary refuge for capital during global instability.

Shift Toward Diversification

Major international asset managers reported that investors are increasingly employing currency hedging or reducing dollar-denominated assets in their portfolios. Roger Hallam, head of global interest rates at Vanguard, noted that heightened volatility in currency markets over the past year has led investors to rethink previous minimal-hedging practices when investing in US assets. This approach aims to reduce dependence on the dollar and protect returns from currency fluctuations.

The appointment of Kevin Warsh as head of the Federal Reserve was initially perceived as a stabilizing factor due to his reputation as an experienced financial specialist. However, subsequent data showed that this leadership change did not restore investor confidence or boost demand for the dollar. The lack of a positive market reaction indicates that structural factors influencing the currency outweigh individual personnel decisions.

Global Capital Reallocates

Valerie Urben, head of the Belgian depository Euroclear, reported that clients are gradually reducing US asset investments and actively diversifying portfolios with European financial instruments. This trend reflects a broader shift in global capital allocation, as investors seek to lower concentration risk associated with a single economy and increase exposure to euro- and other currency-denominated assets.

The New York Times highlighted the emergence of the "Sell America” concept among international investors, reflecting a strategy of reducing holdings in US assets. The approach gained traction after the 2025 trade tariffs caused market declines and increased uncertainty. Rising protectionism, higher budget deficits, and growing US national debt are also seen as long-term risks to the dollar's stability.

Another factor weighing on the dollar is the changing structure of global trade. More countries are using alternative currencies, including the euro and the Chinese yuan, for international transactions. Central banks are increasing gold purchases, viewing it as a neutral reserve asset independent of any one country's policies. This trend, often referred to as de-dollarization, reflects a desire to reduce the global financial system's dependence on a single currency.