HSBC Asset Management observes that April's recovery in risk appetite has coincided with a significant decline in the US Dollar, resulting in year-to-date performance that is essentially flat and consistent with the longer-term 'dollar-down' trend [1]. The bank notes that recent episodes of market volatility suggest only a muted upside for the Dollar, indicating a regime shift linked to gradual de-dollarisation and concerns about US fiscal and institutional dynamics [1].
HSBC points out that, despite ongoing geopolitical and macroeconomic uncertainty, there is a strong likelihood that market volatility will increase again. However, the market action in March indicates that any subsequent boost to the Dollar is likely to be subdued [1]. Over the past couple of years, the Dollar has remained relatively static during periods of volatility, which HSBC interprets as a major regime shift [1].
The bank attributes this shift to factors such as gradual de-dollarisation, mounting concerns over US public finances and institutional integrity, and a growing belief that the Federal Reserve is constrained in its ability to respond to inflation shocks, contrasting sharply with its more aggressive stance in 2022 [1]. HSBC also notes that the narrative of broadening out is somewhat dependent on sustained Dollar weakness, and recent market action supports the plausibility of this scenario continuing into 2026 [1].
CONCLUSION
HSBC Asset Management sees a muted upside for the US Dollar amid increased volatility, de-dollarisation, and concerns over US fiscal and institutional stability. The Dollar's flat performance year-to-date and its static response to volatility suggest a regime shift. Sustained Dollar weakness remains plausible, with market dynamics likely to persist into 2026.