An analyst at banking giant Deutsche Bank says the US dollar will continue to slide in 2026.
In a new interview with Bloomberg Television, George Saravelos, global head of foreign exchange research at Deutsche Bank, says the US dollar will continue to weaken even after a rough 2025, though at a slower pace.
“The full year drop in the dollar in ’25 was the second biggest drop on record since [the] free floating exchange rate started after Bretton Woods. So it was a very big year for foreign exchange. I would argue it’s going to be very difficult to repeat that type of move in 26.”
According to Saravelos, the dollar losing its status as the world’s highest yielding currency in developed nations as well as other countries stimulating their economies is going to hurt its value.
“The dollar is no longer the world’s highest yielding currency in developed markets, at least because the Fed’s been cutting rates, as everyone else has stopped doing the same. And empirically, the dollar being a high yield is a big deal.
And when it no longer is a high yield and you’ve got other currencies now, for example, in Australia or in Norway taking on that property, that removes a big tailwind for the dollar. So that’s number one…
Number two is if you look at the global composition of growth over the last few years, the US was leading the pack and what you’ve seen over the last 12 months is global growth broadening out to other economies as well. Europe is doing fiscal stimulus. Japan is potentially joining.
So overall, a solid global growth outlook. But with growth convergence and the dollar being less of a high yield plus a very large external deficit that’s very reliant on inflows. That’s pretty much the mix that I think should allow the dollar to continue to weaken, but at a much slower pace than we saw last year.”
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