US LNG exports surge but will buyers in China turn up?
Investing.com -- The dollar has made its worst start of the century as President Trump’s tariffs triggered investors to rethink the dollar’s safe haven status. But just as fears about a global trade war recede, Bank of America is warning that the risk of stagflation from the tariff hangover remains-and that outflows from the greenback are just getting started.
“The overwhelming market theme over the past several weeks has related to the re-think of large USD exposures by global investors. Signs of risk premia on the USD persist, likely reflecting these concerns going forward,” BofA analysts said, adding that “real money has ample space to sell” and that the “re-think of USD exposure is just getting started.”
While the recent truce with China has helped ease some of the cyclical headwinds for the dollar, BofA remains bearish. “US growth headwinds remain, & real money re-think of USD exposure just getting started,” the analysts wrote, warning that the US growth outlook-long a pillar of dollar strength-will still be impacted, and that the administration’s perceived preference for a weaker dollar should not be dismissed.
The dollar’s year-to-date selloff has already surpassed all years since 1999 and is on track for one of the worst starts since 1973. “According to our estimates, the USD REER remains overvalued by 22%,” BofA said, noting that historical analogs to 2007 suggest there could be “2-3% more USD downside for the year vs the low from April 21, 2025.”
Consensus has also shifted. BofA’s latest FX & Rates Sentiment Survey found “short USD” is now the highest conviction trade for 2025, and “the most crowded macro trade.” While the dollar appears be taking a breather from its recent beating, the analysts warn that the “real money allocation/hedging story remains lurking in the background, albeit with seemingly less urgency.”
While the worst-case economic outcomes may have been avoided for now, BofA cautions that “stagflationary risks in the US from tariffs remain a key component to the broadly bearish dollar view,” and that any relief from trade deals may only be temporary. “It is premature to wholly write-off this status or the dollar as the top reserve currency,” the analysts said, but the structural headwinds are mounting.
While the dollar’s safe haven status is bruised, not broken, as global investors continue to rethink their exposure, the exodus from the greenback is far from over, Bank of America warned.