By Matthew Burgess and Naomi Tajitsu

(Bloomberg) — The dollar (DX=F) weakened to a six-month low on concern that the confusion around the Trump administration’s tariff policy will drive traders away from US assets.

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The Bloomberg Dollar Spot Index was down 0.3% and earlier touched the lowest level since October. The gauge has slumped almost 6% this year amid escalating trade tensions with China, uncertainty over US policy and concern economic growth will slow.

The dollar’s decline resumed after Trump said on Sunday he will still apply tariffs to phones, computers and popular consumer electronics, downplaying an earlier reprieve as a procedural step in his efforts to overhaul US trade. “NOBODY is getting ‘off the hook,’” the president said in a social media post as trading began in Asia.

The fact that the dollar is weakening, despite Trump’s move to soften some tariff policy should ring “alarm bells for US Treasury Secretary Scott Bessent,” said Jordan Rochester, head of macro strategy for EMEA at Mizuho International Plc.

“He is now seeing a watering down of tariffs but still dollar weakness, and US rates still selling off,” he said in an interview on Bloomberg Television. “It’s a horrible, toxic combination.”

Almost 80% of respondents to a Bloomberg survey predicted the dollar would weaken further over the next month, the biggest proportion of bears since the surveys began in 2022. A gauge of greenback volatility remains close to a two-year high, while speculative traders added to short positions in the US currency in the week though April 8, data from the Commodity Futures Trading Commission show.

Federal Reserve Bank of Minneapolis President Neel Kashkari on Sunday downplayed expectations the central bank would step in to support financial markets after his Boston counterpart Susan Collins suggested that was a possibility. “Investors in the US and around the world are trying to determine what is the new normal in America” and the Fed has “zero ability to affect that,” Kashkari said.

Strategists at the biggest Wall Street banks see the potential for further weakness in the dollar as the impact of Trump’s tariff implementation works its way through the economy and markets.

JPMorgan Chase & Co. analysts suggested investors remain bearish the dollar, especially against the yen and euro, as there’s still a meaningful chance of a US recession. Mizuho Bank Ltd. anticipates the dollar may fall another 5% on a trade-weighted basis before rebounding, based on what happened in 2017-18 and the pandemic.

“The design and implementation of these tariffs should have a negative impact on the currency because they have contributed to eroding consumer and business confidence,” Goldman Sachs Group Inc. analysts including Kamakshya Trivedi wrote in a note.

“If tariffs weigh on US firms’ profit margins and US consumers’ real incomes, like we think they will, they can erode that exceptionalism and, in turn, crack the central pillar of the strong dollar,” they said.

Demand for hedging against potential dollar declines has jumped to a five-year high as the Trump administration’s tariff policy threatens to sap US economic exceptionalism.

An index measuring three-month risk reversals — or the spread between call and put options — on the dollar against 12 of its major peers has dropped to the lowest level since the depth of the global pandemic in March 2020, according to data compiled by Bloomberg.

—With assistance from Michael G. Wilson and Anya Andrianova.

(A previous version of this story was corrected to say five days in first paragraph.)

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