Analysts at Standard Chartered are betting on a rebound in the US dollar. Despite recent weakness, they believe President Donald Trump's fiscal stimulus will eventually give the greenback the boost it needs. For now, however, the dollar remains under pressure following Trump's announcement of sweeping import tariffs.

Currency strategists at Standard Chartered argue that fiscal measures will support the dollar sooner or later. In the near term, they expect a modest recovery.

On April 3, the dollar tumbled nearly 2% to a 6-month low, notching its steepest single-day drop since November 2022. The dramatic drop followed Trump's announcement of a 10% baseline tariff on all imports, along with hefty tariffs of up to 54% on certain countries, including China.

According to the bank's analysts, the market was caught off guard by "the harshness of the tariffs," which marked the most aggressive trade action since the 2008-2009 financial crisis. Back then, the dollar was viewed as a safe-haven asset and rallied as investors fled risk. "This time looks different so far," Standard Chartered noted.

The dollar's plunge was one of the sharpest single-day declines in the past 15 years. Notably, it was one of the few episodes in which the dollar fell during a global stock market sell-off, an unusual divergence from traditional safe-haven behavior.

Standard Chartered attributes the lack of dollar demand to subdued global appetite for dollar liquidity. "There was little visible panic need for dollar funding from the private and public sectors outside the US," the bank said.

In its baseline forecast, Standard Chartered expects the US dollar to stage a gradual recovery in the second quarter of 2025. "The market reaction has certainly raised some questions, but we expect the fiscal bill to add net stimulus, provide a cyclical boost to the economy, and lead to higher rates and a stronger USD," the analysts concluded.