The additional return investors require to hold U.S. dollar-denominated assets is rising and could increase further, according to analysts at Barclays.
In a research note, Barclays analysts Themistoklis Fiotakis and Lefteris Farmakis said recent remarks from President Donald Trump, which appeared to support a weaker dollar, have widened the so-called dollar risk premium.
They pointed to a growing disconnect between U.S. interest rate expectations and movements in the euro–dollar exchange rate. While rate-based indicators suggest EUR/USD should be trading in the mid-1.10s, the pair has already moved above $1.20 for the first time since 2021, highlighting increased pressure on the greenback. The analysts noted, however, that these relationships are not fixed and can break down under shifting market conditions.
Against this backdrop, Barclays said the euro has emerged as the primary anti-dollar trading vehicle, reflecting broader investor skepticism toward the U.S. currency.
Earlier this week, Trump dismissed concerns about the dollar’s sharp decline to near four-year lows, calling the currency’s level “great.” Despite those comments, traders continued to sell the dollar, with markets also focused on an upcoming policy decision from the Federal Reserve.
Additional pressure has come from the Japanese yen, which has strengthened on speculation of possible coordinated action between Japan and the United States to support the currency.
As a result, the dollar is on course for its largest weekly drop since April, reinforcing concerns that the risk premium attached to the U.S. currency is continuing to build.
