The Markets Why the Dollar Could Drop
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Dec 5, 2025 Brian Dunne, head of Americas Foreign Exchange Options Trading at Goldman Sachs, offers valuable insights into the U.S. dollar's current stagnation and potential decline. He discusses factors that could trigger a sell-off, linking fiscal concerns to asset rallies in gold and crypto. Dunne also highlights how macroeconomic data and recent Federal Reserve nominations could shape dollar movements. His preferred trading strategies include dollar exposure against emerging markets, anticipating a 5–10% depreciation toward fair value.
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Dollar Still Has Downside In Early 2026
- The dollar likely has more room to depreciate in H1 next year according to Brian Dunne.
- This view contrasts with a largely unchanged DXY over recent months despite big moves in high-yield EM currencies.
EM Carries Drove Dollar Divergence
- The Dollar Index (DXY) has been flat while higher-yielding emerging market currencies outperformed significantly.
- Brazil led with ~17% spot gains and nearly 30% total returns driven by nominal and real rate carry.
Fiscal Fears Sparked Hard-Asset Demand
- The 'debasement' trade was driven by U.S. fiscal concerns and widened when fiscal worries appeared in the UK, France, and Japan.
- That pushed flows into hard assets like gold and also helped crypto rally as investors sought alternatives to fiat.