Dollar faces $2.5trn ‘avalanche’ of Asian sales

The dollar may face a $2.5 trillion “avalanche” of selling as Asian countries unwind their stockpile of the world’s reserve currency, according to Stephen Jen.

Asian exporters and investors may have amassed an “extremely large” pile of dollars through the years, widening the region’s trade surplus with the US, Eurizon SLJ Capital’s Jen and Joana Freire wrote in a note on Wednesday. As a US-led trade war deepens, some Asian investors might repatriate chunks of funds or ramp up levels of protection against a weakening dollar – potentially triggering an exodus from the world’s reserve currency.

“We suspect these dollar hoardings by Asian exporters and institutional investors may be extremely large – possibly on the order of $2.5 trillion or so – and pose sharp downside risks to the dollar vis-à-vis these Asian currencies,” Jen and Freire wrote.

The greenback’s long-term appeal is coming under threat as Donald Trump’s efforts to remake the global trade order prompt investors to reconsider their US exceptionalism trade strategies. An outsized jump in the Taiwan dollar on Monday added to speculation that Asia’s policymakers may be prepared to let their currencies appreciate versus the dollar as part of efforts to secure a trade deal with the US.

Bloomberg’s dollar gauge has dropped about 8% from a February high, and all Asian currencies have strengthened versus the greenback in the past month.

Jen, known for his work on the “dollar smile” theory, had previously said about $1 trillion could flow back to the world’s no. 2 economy as Chinese companies sell their dollar-denominated assets when the Federal Reserve cuts interest rates.

Accelerating the multi-trillion dollar flows may be “naked long-dollar positions” prevalent among Asian countries that run large external surpluses, he wrote, referring to positions that are not hedged against fluctuations in the dollar. Some of these countries include China, Taiwan, Malaysia and Vietnam.

There is an “important imbalance in the world that puts the dollar in a vulnerable position,” Jen wrote in the latest report.

© 2025 Bloomberg L.P.

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