Dollar’s demise ‘greatly exaggerated’ as Trump’s growth agenda to spur recovery

Investing.com -- The dollar has fallen victim to the impact of tariffs denting its safe-haven status, but Wells Fargo (NYSE:WFC) strategists say the ride lower is unlikely to last, insisting talk of the greenback’s demise is "greatly exaggerated." Fundamentals, including robust U.S. economic growth powered by President Donald Trump’s fiscal agenda, are poised to rescue the world’s reserve currency.

The greenback has endured a “challenging repricing period this year as markets adjust to rapid policy change,” Wells Fargo strategists said in a recent note, with tariff and budget uncertainty whipsawing both equities and fixed income.

The selloff has been hard to miss: “Although much ink has been spilled in 2025 around the U.S. Dollar Index’s more than 10% year-to-date drop (through June 30, 2025), the greenback is down less than 4% from the end of last September—the point at which market participants started pricing in President Donald Trump’s 2024 election victory,” they added.

But reports of the dollar’s demise are “greatly exaggerated.” As the strategists point out, “the greenback remains the linchpin of global trade and finance and is far from becoming irrelevant.” Despite the volatility, the dollar is still trading near its 10-year average, and Wells Fargo expects it to “stabilize at a modestly higher level later this year and through 2026 as fundamental drivers begin to reassert themselves.”

The fundamentals, which have been clouded in tariff-driven uncertainty, are likely to prevail as Trump’s fiscal agenda begins to take shape, underpinned the economy. Wells Fargo expects “relatively strong U.S. economic growth as tax cuts and the cumulative effect of deregulation spur a moderate growth recovery overriding the negative economic impact from tariffs and tighter immigration controls.” That growth, menawhile, should keep U.S. interest rates elevated relative to peers, especially as the Fed remains hesitant to cut while the ECB and Swiss National Bank have already moved aggressively to ease.

Wells Fargo also cautions against betting on the end of dollar dominance, preferring to "avoid making portfolio adjustments based on speculation that the dollar may be in danger of losing its global status anytime soon." The hit to the deep-seated advantages of the U.S. system, from rule of law to financial market liquidity, are likely to be limited. 

While the dollar’s share of reserves may erode slowly over time, “a global shift away from the dollar [is] an extremely difficult and slow-moving process—especially because of underlying weaknesses of the most visible dollar alternatives," Wells Fargo added.