"HSBC": The wave of selling the dollar is a bubble bubble

HSBC analysts have warned that the ongoing decline in the value of the US dollar is starting to take the features of a “financial bubble”, and that this bubble would eventually explode as is the case with all bubbles. In a research note led by Paul Maccal, analysts indicated that the traders are excessively focusing on the sharp drop in the dollar since the beginning of the year, and they show a tendency to weigh the continuation of this poor performance, behavior that has bubbles in the markets. Analysts wrote: “It is not long ago that there was a clear bubble of the strong dollar, but what we see today completely represents the contrast: something similar to the ‘opposite bubble’ caused by excessive sales of the currency.” They added: “This type of behavior indicates that the dollar may be about to reach the bottom.” The performance of the dollar in 2025 The Bloomberg index for the dollar fell by more than 8% this year, in light of the confusion as a result of high US customs duties, which raised questions about the stability of the global reserve currency. Although “HSBC” expected the dollar’s continued weakness in the coming months, analysts indicated that the justifications for further decline became “largely one -sided”. The research team explained that the uncertainty surrounding US policy has weakened the attractiveness of the dollar as a safe haven currency, and strengthened the global tendency to reduce the dependence on the dollar. However, the strength of these arguments has dropped significantly since President Donald Trump declared comprehensive customs duties in April last year. Analysts also pointed out that the yield of the historical relationship between the dollar and the yields of US bonds may be indicative of the approaching end of the decline, at a time when a similar relationship between US stocks began to form and yields to the tools of debt. The possibilities of droping the dollar in return, “HSBC” warns that the dollar drop could accelerate if the state of political ambiguity returns to a ‘real challenge’ in the United States, or if the global economy grows faster than expected. Although these scenarios are not one of the basic expectations of the bank, it remains factors that need to be taken into account. Analysts also indicated that the replacement of the Federal Reserve chairman, Jerome Powell, together with the strong performance of the euro, could be one of the potential factors that could accelerate the ‘dollar sale bubble explosion’, which means the market can push strong in the opposite direction. Macc and his team concluded by saying, “As we recognize the possibility of the dollar’s weakness in the short term, we must note the signals that are a foreground near the end of this road. We believe that an anti -dollar bubble began to form, and although it did not reach the stage of the explosion, all the bubbles ended in the explosion sooner or later.”