Dollar may become risky currency — Goldman Sachs

Goldman Sachs analysts have warned that the American dollar could revert to exhibiting characteristics typical of riskier currencies. While dollar volatility has eased in recent weeks, underlying factors remain that could make it vulnerable to renewed market turbulence.

Key concerns include Washington’s policy uncertainty, encompassing potential new tariffs, questions about the Federal Reserve’s independence, and an expanding budget deficit. Simultaneously, investors are increasingly diversifying their portfolios away from US assets, potentially undermining the dollar’s traditional status as a safe-haven currency.

Bloomberg data shows the correlation between dollar movements and the VIX volatility index has dropped to a seven-year low. Historically, dollar strength coincided with equity market declines, but this relationship has weakened. Since early 2025, the dollar has frequently declined alongside domestic stocks and occasionally even with bonds, a trend Goldman Sachs interprets as reflecting diminished appeal of US assets overall.