Deutsche Bank warned on Thursday of the risk of a crisis of confidence in the U.S. dollar, saying major shifts in capital flow allocations could take over from currency fundamentals and currency moves become disorderly.
The dollar, the world's No.1 reserve currency, came under broad-based selling pressure on Thursday as U.S. President Donald Trump's latest tariff salvo raised concerns about U.S. recession risks.
"Our overall message is that there is a risk that major shifts in capital flow allocations take over from currency fundamentals and that FX moves become disorderly," Deutsche Bank's George Saravelos said in note.
He added an acceleration in the dollar's decline would be unwelcome for global central banks.
"The last thing the ECB wants is an externally imposed disinflationary shock from a loss in dollar confidence and a sharp appreciation in the euro on top of tariffs," he said, referring to the European Central Bank.
"Expect pushback. We are in the midst of dramatic regime change in markets."
The dollar was last down over 1.5% against the euro and yen and more than 1% against sterling. ,
