Mitsubishi UFJ warns that the benefits from the U.S. dollar's wartime gains will eventually dissipate, as de-dollarization undercurrents and fiscal deficits lay the foundation for long-term depreciation.

Mitsubishi UFJ warns that the benefits from the U.S. dollar's wartime gains will eventually dissipate, as de-dollarization undercurrents and fiscal deficits lay the foundation for long-term depreciation.

汇通财经2026/04/23 13:49

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The head of European Global Markets Research at Mitsubishi UFJ Financial Group stated clearly in an exclusive interview on Thursday that once the Iran war ends, all the negative fundamental factors that had been dragging down the US dollar before the conflict will return in full force. The triple shackles of the US Federal Reserve’s threatened independence, bleak US fiscal outlook, and trade uncertainty will once again strangle the dollar after the conflict narrative fades.
The executive emphasized that the US dollar’s fundamental environment has been poor both before and after the war. Although the dollar briefly strengthened after the outbreak of war at the end of February due to panic over disrupted energy supplies and safe-haven inflows, its gains have been limited mainly because the surge in crude oil prices fell far short of previous energy shocks, and the resilience shown by the stock market has weakened the demand for the dollar as a safe haven.
The trend of investors, institutions, and countries shifting away from dollar assets has continued for years without signs of reversal. According to International Monetary Fund data, the US dollar’s share of global foreign exchange reserves shrank from 58.52% a year ago to 56.77% in the fourth quarter of last year. The euro is seen as the main beneficiary in this round of de-dollarization, and Mitsubishi UFJ’s model predicts the euro will rise to $1.20 by the end of the year.
Concerns over the Federal Reserve’s independence have become a unique new vulnerability for the dollar. Although the next Fed Chair nominated by Trump enjoys more credibility than other candidates, they may be more likely to comply with the president’s calls for rate cuts. In January this year, the New York Fed, on behalf of the Treasury Department, asked dealers to check the US dollar/yen exchange rate—an action interpreted by the market as an official signal that intervention to sell the dollar was possible.
The abyss of the US fiscal deficit is another guillotine hanging over the dollar. The Congressional Budget Office predicts the deficit will reach $1.9 trillion this year and further balloon to $3.1 trillion by 2036. Ongoing reverberations from Trump’s tariff remarks mean trade uncertainty cannot be fully eliminated. Doubts over debt sustainability and expectations of currency depreciation will reinforce each other and become a persistent force driving the dollar’s long-term downward trend.

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Mitsubishi UFJ warns that the benefits from the U.S. dollar's wartime gains will eventually dissipate, as de-dollarization undercurrents and fiscal deficits lay the foundation for long-term depreciation.

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