Nomura Securities believes that even without a formal "Mar-a-Lago Accord," the market may already be betting on a depreciation of the dollar in advance.
Nomura Securities found in the recent Central Bankers Seminar that the risk discussion about the U.S.-dominated "Mar-a-Lago Accord" has attracted widespread attention. Nomura Securities believes that the possibility of reaching such an agreement in the coming months is small, mainly due to the following reasons:
Lack of political unity among major countries, with the recovery of most major economies still in its infancy or slowing down (except for Japan).
The historical lessons from Japan's "Lost Thirty Years."
Trump and Treasury Secretary Yellen have not taken any new measures to push for a weaker dollar in recent months.
Trump may focus heavily on advancing his tariff policies and attempt to facilitate a peace agreement between Russia and Ukraine in the coming months.
Nevertheless, continuous market discussions and even early positioning regarding such agreements might push the dollar to continue weakening. So far this year, the US Dollar Index has fallen from around its yearly high of 110 to the latest 104.28, a decline of approximately 5.2% year-to-date.
According to Nomura Securities analysis, before major policy agreements are reached, the market often reacts in advance. For example, seven months prior to the "Plaza Accord" signed on September 22, 1985, the dollar began to depreciate significantly, with the US Dollar Index falling by approximately 15%. In the 12 months following the signing of the agreement, the US Dollar Index fell further by 24%. At that time, central banks were also major sellers of the dollar; the Bundesbank actively sold dollars during February and March 1985.
Meanwhile, Nomura Securities analysts pointed out that the expectation of a weaker dollar may stem from multiple factors:
Foreign investors' concerns about the devaluation of the dollar leading to reduced returns on overseas investments may drive more foreign exchange hedging or the sale of U.S. assets.
Skepticism about the U.S. economic cycle, particularly the market's sensitive reaction to hard data (such as non-farm payrolls), may increase downside risks for the dollar and U.S. stock markets.
Changes in market sentiment may guide capital outflows, especially under the influence of asset reallocation themes, where foreign capital may seek safer investment channels.
Nomura Securities emphasized that changes in market sentiment may guide capital outflows, especially under the influence of asset reallocation themes, where foreign capital may seek safer investment channels.
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