Despite a recent pause in its sharp decline, the US dollar is expected to weaken further, according to positioning in the currency options market. Investor sentiment has deteriorated this year due to President Donald Trump's aggressive tariff policies, which pushed the greenback to a three-year low, Investing.com reports.
Analysts note an unprecedented demand for put options, particularly against the euro and yen. Key market indicators show positioning for euro strength against the dollar is near multi-year highs. Additionally, CME Group data reveals that greenback put options accounted for over 59% of options volume in May.
Furthermore, investor confidence in the American economy's ability to outperform the rest of the world is declining, driven by concerns over rising national debt and a widening budget deficit. These factors are encouraging investors to shift away from US assets, the report concludes.