Currency Avalanche? Why the Dollar Could Be in Trouble

​The U.S. dollar might be facing an unexpected slide—and it could be just the start. According to Stephen Jen of Eurizon SLJ Capital, a financial "avalanche" may already be rumbling through global currency markets.

What Sparked the Alarm
Last week, the Taiwan dollar surged more than 9% against the greenback, its biggest two-day move on record. Other Asian currencies, like the Korean won, followed suit. While the initial reaction has since calmed, some analysts see these moves as the early tremors of a much larger shift.

Jen warns that a sharp, nonlinear sell-off in the U.S. dollar—driven by foreign exporters unloading their dollar holdings—could be imminent. The risk is especially high from Asia, where countries like China, Taiwan, Malaysia, and Vietnam have collectively amassed over $2.5 trillion in dollar reserves.

Why Now?
Several forces are converging:
-Tariff tension: Trump’s aggressive trade policies may be souring sentiment toward the dollar.
-Rate cut risk: Expectations are rising that the Fed will lower interest rates in 2025, weakening the dollar's appeal.
-Geopolitical pressure: A possible shift by China to let the yuan appreciate could trigger broader dollar outflows.

In short, the dollar looks vulnerable—especially if U.S. policy missteps coincide with a global pivot away from dollar reserves.

Skeptics Push Back
Not everyone is convinced. Barclays analysts argue the Taiwan dollar’s surge is overdone and unlikely to lead to mass dollar dumping. Plus, many foreign institutions, like insurance firms, may hesitate to sell and realize losses.

But Deutsche Bank did find signs that Taiwan ETFs dumped U.S. bonds this week—raising eyebrows.

Bottom Line
The U.S. dollar isn’t collapsing—yet. But if central banks and major exporters start exiting their positions in bulk, it could snowball fast. For now, markets are watching closely, and the tremors may just be the warning signs.







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