Goldman Sachs analyst sees increase in currency hedging accelerate dollar’s decline

According to Richard Chambers from Goldman Sachs, the dollar might continue its decline as currency hedging ratios rise, driven by foreign investors hedging against volatility.

The Bloomberg Dollar Index has already fallen by more than 8% in 2025, marking the worst start to a year on record amid market turmoil caused by US President Donald Trump's policies.

Chambers also predicts a decrease in foreign demand for US securities, including stocks, government debt, and corporate bonds. He expects European investors to increasingly favor their domestic markets as countries in the region ramp up fiscal borrowing and spending. This will enhance the euro's role as an alternative reserve currency.

Chambers believes that due to the growing inclination of foreign investors to invest in local markets and move away from the dollar, the US will have to rely more on domestic buyers to finance the rising debt.