The U.S. dollar is facing significant headwinds. According to Goldman Sachs Chief Economist Jan Hatzius, the dollar under pressure may continue to fall in the coming months.
So far, April has been a tough month for the greenback. The dollar has dropped more than 4.5%, marking its steepest monthly decline since late 2022. This trend has raised concerns about investor confidence in the world’s leading reserve currency.
Throughout 2025, the dollar has already lost 8% against a basket of major currencies. Hatzius believes this decline could mirror past cycles. In the 1980s and early 2000s, similar conditions triggered 25% to 30% drops in dollar value.
Rising tariffs and economic uncertainty are fueling this shift. Investors are pulling money from U.S. assets. As a result, the dollar is weakening, putting additional strain on inflation. A weaker currency raises the price of imports, which can drive up consumer prices.
However, there is a silver lining. A weaker dollar makes U.S. exports cheaper, which could help shrink the trade deficit. It may also provide some protection against a potential recession.
Still, Hatzius warns that not all drivers of dollar weakness are positive. If global investors reduce their appetite for U.S. assets, financial conditions could tighten. The U.S. needs $1.1 trillion in capital inflow each year to fund its current account deficit. A pause in foreign investment could push the dollar under pressure even further.
At present, foreign investors hold about $22 trillion in U.S. assets. Half of that amount is in equities. These holdings are often unhedged, making them sensitive to currency shifts.
Moreover, the IMF has revised its growth forecast for the U.S. economy. It now expects growth to slow from 2.8% last year to just 1.8% in 2025. This downtick makes the U.S. less attractive compared to other global markets.
Despite the recent drop, Hatzius does not believe the dollar is in danger of losing its global reserve currency status. He notes that the dollar’s role as a medium of exchange and store of value remains dominant.
Looking ahead, other currencies could strengthen. Deutsche Bank expects the euro to climb to $1.30 before 2030. Currently, it stands at $1.13.
Even with these challenges, Hatzius remains cautious in his outlook. “Predicting exchange rates is extremely difficult,” he says. Yet he believes the recent 5% decline is just the beginning. For now, the dollar under pressure remains a major theme in global markets.
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