Dollar May Face ‘Major’ Drop in 2026, Standard Chartered Says

Standard Chartered warns of a potential "major" dollar downturn in 2026, contingent on President Trump's policies increasing U.S. debt without stimulating economic growth. The bank's research note highlights the simultaneous increase in U.S. government debt and foreign-held debt, making the dollar and Treasuries vulnerable to a loss of confidence among foreign investors assessing the long-term impact of increased borrowing.

Analysis

Standard Chartered projects a heightened risk of a "major" downturn for the US dollar in 2026, contingent on potential fiscal policies under a Trump administration that exacerbate the US debt burden without delivering substantial economic growth. The bank's research note highlights a growing vulnerability arising from the simultaneous increase in US government debt and the volume of this debt held by foreign entities. This dynamic renders the dollar and US Treasuries susceptible to a loss of confidence among international investors as they gain greater clarity on the long-term ramifications of increased US borrowing. The analysis indicates that a failure of future policies to boost the economy, while adding to national debt, would significantly elevate the probability of a sharp dollar decline.

Key Decisions for Investors

• Investors should closely monitor US fiscal policy developments, particularly under a potential Trump presidency, and their impact on the national debt relative to economic growth metrics, as 2026 approaches.
• It may be prudent to evaluate currency diversification strategies and consider potential hedges against a dollar downturn if US debt accumulation accelerates without commensurate economic expansion, potentially eroding foreign investor confidence.
• Holders of US Treasuries should be cognizant of the increased risk profile stemming from potential shifts in foreign investor sentiment, which could be triggered by concerns over the sustainability of US debt and its longer-term economic impact.