While the daily news cycle has already moved on, the shockwaves from the dollar’s abrupt devaluation in recent weeks will not be so easily dismissed by the financial markets.
For Marc Chandler, the recent tremors are yet another signal that the greenback is locked in a long-term downtrend. The chief market strategist at Bannockburn Global Forex has navigated the currency markets for some four decades. He recalls the time at the start of his career in the Chicago futures pits when exchange rates were still being scribbled in chalk on blackboards.
«This year’s decline caught even dollar bears like me by surprise,» says Chandler, referring to the panic that gripped markets in late January. To him, the currency’s weakness is a manifestation of a fundamental shift in the established global order. Under President Donald Trump, he argues, the U.S. is retreating from its leadership role – a move that brings the dollar’s unique role as the world’s reserve currency into question.
In an in-depth interview with The Market NZZ, which has been edited for length and clarity, Chandler outlines why the administration welcomes a weaker greenback and the tools it may deploy to further that goal. He also examines why the Swiss National Bank may soon be forced into unconventional territory and how investors can navigate an era defined by heightened currency volatility.
The initial market fervor has cooled somewhat, yet the dollar has found itself under renewed pressure this year. How do you read these shifts in the currency markets?
In China, the phrase ‹May you live in interesting times› is intended as a curse. After living through the past weeks, I can understand why. The big moves in the foreign exchange markets capture the major forces we’re seeing unfold. Only a year into President Trump’s second term, US policy has already undergone a series of major shifts. I think they’re a defining factor in the dollar’s current trajectory, leading many to wonder if we are witnessing the end of what’s called American exceptionalism.
Are witnessing the dawn of a new global order?
We can debate the potential end of American exceptionalism in terms of the dollar. But the start of this year has revealed two significant ways in which that exceptionalism remains still intact, even if it’s no longer mirrored in the financial markets. The first is the aggressive foreign policy seen in the US actions in Venezuela as well as the threats regarding Greenland. No other country in the world could do that without facing serious ramifications. Imagine what would happen if China tried to do something like that.
And what’s the second point?
Secondly, the Trump administration has successfully negotiated a carve-out that exempts US companies from global corporate tax reform. So America still insists on being the judge, jury, and executioner, but it won’t tolerate any other country doing so.
America has historically justified its role as the ‹global policeman› through the ideals of democracy, liberty, and fair trade. Isn’t it now undermining the very image it spent decades cultivating—an image that was already under significant scrutiny?
I agree. Just as Coca-Cola once damaged its brand by trying to change its formula, America has hurt its own brand. There is, however, a critical distinction: while companies can often rebound, I believe it will be far more difficult for the US to recover its standing. The US was instrumental in creating the post-World War II order, which frayed around the edges at times, facing problems and charges of hypocrisy. But there was always a general agreement on the rules of engagement, certain norms and traditions such as the freedom of navigation through the world’s oceans.
What does it mean for the dollar if these foundational conditions no longer apply?
I’ve always reasoned that there are two ways the dollar could lose its preeminence in the world economy: encroachment, in which another currency supplants the dollar, or abdication, where the US pursues policies that shrink back from the global leadership it previously sought. Today, I think the US is giving up, abandoning its role it exercised through the IMF, the WTO, and other international bodies. But it’s not just that the US is defecting from the established world order, it’s also shooting itself in the foot for the coming world order.
What to you mean by that?
It’s hard to tell what the coming world order will look like, but we can see certain broad strokes. For example, there’s a real chance that China is going to win the AI war. You can just look at the sheer number of engineering graduates in China, and then you have the fact that the US government has essentially fired more than 10,000 STEM PhDs since President Trump took office. Another point: partly because of immigration, the US demographics are a little bit better than those in continental Europe. But now, we’re cutting that off – and not only are we cutting it off, but many Americans, including the administration, are proud of it.
So, is the pressure on the dollar here to stay?
When it comes to what this all means for the dollar, I believe the peak is already behind us. The DXY index for instance, which measures the US dollar against a basket of major currencies, including the euro, the British pound, the yen and the Swiss franc, reached its high-water mark in September 2022. So I think a long-term bear market for the dollar is just getting started. While most people agree on the general trend, strategists and analysts are bickering over the speed of the downturn. This year’s decline caught even dollar bears like me by surprise, especially when you consider the sharp moves against the Mexican peso and the Australian dollar.
Despite the violent swings in the currency markets, the US bond market has remained surprisingly quiet. How do you explain this disconnect?
People often talk about the exorbitant privilege the US enjoys thanks to the dollar, suggesting it grants us lower borrowing costs. But it’s not true. The US pays higher interest on its debt than most developed countries, including Germany and Japan, and certainly Switzerland – and for good reason. US politicians, and arguably the public themselves, prefer the economy to run fast. Meaning, if we have to choose between unemployment and inflation, we would generally accept a little more inflation in exchange for lower unemployment. Furthermore, given the political changes in the US and their unpredictable nature, investors are demanding a higher premium to hold dollar assets. In other words, they require higher interest to compensate for the anticipated decline of the dollar.
In this context, contradictory statements from the White House have recently fueled even more uncertainty. Does the Trump administration want a weak dollar?
In the market’s mind, there’s a general understanding that the president and his administration want to see a weaker dollar. They don’t say it out loud, but the policies that they advocate – lower interest rates, boosting exports, and putting tariffs on imports – clearly imply a weaker dollar. The US economy grew by more than 4% in the third quarter of 2025, and it looks to have expanded at a solid pace during the final three months of the year. Cutting interest rates in this kind of environment would likely send the dollar sharply lower.
There is frequent talk of a ‹Mar-a-Lago Accord›, essentially a 21st-century sequel to the 1985 Plaza Accord, where France, West Germany, the U.K., and Japan agreed in a concerted effort to appreciate their currencies against the dollar. What are the odds of such an agreement today?
I don’t think there’s any chance that the Trump administration will find Europe or Asian countries like China and Japan open to a new Plaza Accord. They won’t risk an appreciation of their currencies to levels that are inducing domestic deflation. In the US, we’re proud of what happened back then. The Plaza Accord is one of the highlights when we tell this story about the dollar and the post-Bretton Woods era. However, in other countries, the perception is not as positive. China hasn’t forgotten what the US did to Japan, forcing a sharp revaluation of the yen that hollowed out the Japanese economy and fueled a massive bubble.
So what kind of policy can we expect the Trump administration to pursue?....
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